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 $ 55,900 71,810 281,656 1,250 410, 616 153,500 (3B, 625) $525,491 $ 77,500 54,625 255,800 1,975 389,900 112,000 (48,000) $453,900 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 $ 57,141 11,200 6B, 341 63,000 131,341 $120, 675 6,800 127,475 52,750 180, 225 168,750 43,500 181,900 $525, 491 154,250 0 119, 425 $453, 900 $602,500 289,000 313,500 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 24,750 Other expenses 136, 400 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 161, 150 (9,125) 143, 225 29,850 $113,375 Additional Information on Current Year Transactions a. The loss on the cash sale of equipment was $9,125 (details in b). b. Sold equipment costing $58,875, with accumulated depreciation of $34,125, for $15,625 cash. c. Purchased equipment costing $100,375 by paying $38,000 cash and signing a long-term note payable for the balance. d. Borrowed $4,400 cash by signing a short-term note payable. e. Paid $52,125 cash to reduce the long-term notes payable. f. Issued 2,900 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $50,900. Required: Prepare a complete statement of cash flows using the direct method (Amounts to be deducted should be indicated with a minus sign.) Answer is not complete. 113,375 24,750 FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Net income $ Depreciation expense Increase in accounts receivable Increase in merchandise inventory Decrease in prepaid expenses x Net cash provided by operating activities Cash flows from investing activities Cash paid for equipment Cash received from sale of equipment $ 138,125 OO x 0 Net cash provided by investing activities Cash flows from financing activities Cash borrowed on short-term note Cash paid on long-term note Cash received from issuing stock Cash paid for dividends OOOOO 0 138,125 $ Net cash used in financing activities Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 138,125
