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, and (4) all debits to Accounts Payable reflect cash payments for inventory. FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales $ 582,500 285,000 297,500 $ 132,400 20,750 153, 150 Cost of goods sold Gross profit Operating expenses (excluding depreciation) Depreciation expense Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income (5,125) 139,225 24,250 $ 114,975 FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $ 49,800 65,810 275,656 1,250 392,516 157,500 (36,625) $ 513,391 $ 73,500 50,625 251,800 1,875 377,800 108,000 (46,000) $ 439,800 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accumulated depreciation Equipment Total assets Liabilities and Equity Accounts payable 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 $ 53,141 75,000 128,141 $ 114,675 54,750 169,425 162,750 37,500 185,000 $ 513,391 150, 250 0 120,125 $ 439,800 Additional Information on Current Year Transactions a. The loss on the cash sale of equipment was $5,125 (details in b). b. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash. c. Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term notes payable for the balance. d. Paid $46,125 cash to reduce the long-term notes payable. e. Issued 2,500 shares of common stock for $20 cash per share. f. Declared and paid cash dividends of $50,100. FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operations: Income statement items not affecting cash 114.975 Changes in current assets and current liabilities $ 114.975 Cash flows from investing activities 0 Cash flows from financing activities: 0 $ 114.975 Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 114,975