Required information (The following information applies to the questions displayed below.) Forten Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $ 57,400 73,320 283, 156 1,260 415,136 152,500 (39,125) $528,511 $ 78,500 55,625 256,800 1,995 392,920 113,000 ( 48,500) $ 457, 420 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term notes payable Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings Total liabilities and equity $ 58,141 11,500 69,641 62,500 132,141 $ 122,175 7,000 129, 175 53, 750 182,925 155, 250 170,250 45,000 181,120 $528,511 119, 245 $ 457, 420 $607,500 290,000 317,500 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 25,750 Other expenses 137,400 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 163,150 (10,125) 144, 225 31,250 $112,975 Additional Information on Current Year Transactions a. The loss on the cash sale of equipment was $10,125 (details in b). b. Sold equipment costing $61,875, with accumulated depreciation of $35,125, for $16,625 cash. c. Purchased equipment costing $101,375 by paying $40,000 cash and signing a long-term note payable for the balance. d. Borrowed $4,500 cash by signing a short-term note payable. e. Paid $52,625 cash to reduce the long-term notes payable. f. Issued 3,000 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $51,100. TURIEN CUMPANT Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Net income $ 112,975 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 25,750 Loss on disposal of equipment ( 10.125 Accounts receivable increase (17,695) Inventory increase 26,356 Prepaid expense decrease Accounts payable decrease (64,034) Cash borrowed on short-term note (4,500) Net cash provided by operating activities Cash flows from investing activities Cash received from sale of equipment Cash paid for equipment 735 $ 89,712 Net cash provided by investing activities Cash flows from financing activities: Notes payable long-term decrease Cash received from issuing stock Cash paid for dividends dividends Net cash used in financing activities Net increase (decrease) in cash Cash balance at December 31, prior year $ 89,712
