Required information [The following information applies to the questions displayed below.] Forten Company, a merchandiser, recently completed its calendar-year 2017 operations. 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. The company's income statement and balance sheets follow. 2016 FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 2017 Assets Cash $ 49,800 Accounts receivable 65,810 Inventory 275,656 Prepaid expenses 1,250 Total current assets 392,516 Equipment 157,500 Accum. depreciation-Equipment (36,625) Total assets $513, 391 Liabilities and Equity Accounts payable $ 53, 141 Short-term notes payable 10,000 Total current liabilities 63, 141 Long-term notes payable 65,000 Total liabilities 128, 141 Equity Common stock, $5 par value 162,750 Paid-in capital in excess of par, 37,500 common stock Retained earnings 185,000 Total liabilities and equity $513,391 $ 73,500 50,625 251,800 1,875 377,800 108,000 (46,000) $439,800 $114,675 6,000 120, 675 48,750 169,425 150, 250 0 120, 125 $439,800 FORTEN COMPANY Income Statement For Year Ended December 31, 2017 Sales $582,500 Cost of goods sold 285,000 Gross profit 297,500 Operating expenses Depreciation expense$ 20,750 Other expenses 132,400 153, 150 Other gains (losses) Loss on sale of equipment (5,125) Income before taxes 139, 225 Income taxes expense 24, 250 Net income $114,975 Additional Information on Year 2017 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 note payable for the balance. d. Borrowed $4,000 cash by signing a short-term note payable. e. Paid $50,125 cash to reduce the long-term notes payable. f. Issued 2,500 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $50,100. Required: 1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operations: Depreciation expense Accounts receivable increase Prepaid expense decrease Inventory increase Accounts payable decrease Loss on disposal of equipment $ 0 Net cash provided by operating activities Cash flows from investing activities Cash paid for equipment Cash received from sale of equipment 0 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 0 0 $ Net increase (decrease) in cash Cash balance at beginning of year Cash balance at end of year $ 0
