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Use the following information for the Problems below. Skip to question [The following information applies to the questions displayed below.] Forten Company's current year income
Use the following information for the Problems below.
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[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 | ||||||||||
Assets | |||||||||||
Cash | $ | 61,900 | $ | 81,500 | |||||||
Accounts receivable | 77,850 | 58,625 | |||||||||
Inventory | 287,656 | 259,800 | |||||||||
Prepaid expenses | 1,290 | 2,055 | |||||||||
Total current assets | 428,696 | 401,980 | |||||||||
Equipment | 149,500 | 116,000 | |||||||||
Accum. depreciationEquipment | (40,625 | ) | (50,000 | ) | |||||||
Total assets | $ | 537,571 | $ | 467,980 | |||||||
Liabilities and Equity | |||||||||||
Accounts payable | $ | 61,141 | $ | 126,675 | |||||||
Short-term notes payable | 12,400 | 7,600 | |||||||||
Total current liabilities | 73,541 | 134,275 | |||||||||
Long-term notes payable | 61,000 | 56,750 | |||||||||
Total liabilities | 134,541 | 191,025 | |||||||||
Equity | |||||||||||
Common stock, $5 par value | 174,750 | 158,250 | |||||||||
Paid-in capital in excess of par, common stock | 49,500 | 0 | |||||||||
Retained earnings | 178,780 | 118,705 | |||||||||
Total liabilities and equity | $ | 537,571 | $ | 467,980 | |||||||
FORTEN COMPANY Income Statement For Current Year Ended December 31 | |||||||
Sales | $ | 622,500 | |||||
Cost of goods sold | 293,000 | ||||||
Gross profit | 329,500 | ||||||
Operating expenses | |||||||
Depreciation expense | $ | 28,750 | |||||
Other expenses | 140,400 | 169,150 | |||||
Other gains (losses) | |||||||
Loss on sale of equipment | (13,125 | ) | |||||
Income before taxes | 147,225 | ||||||
Income taxes expense | 35,450 | ||||||
Net income | $ | 111,775 | |||||
Additional Information on Current Year Transactions
- The loss on the cash sale of equipment was $13,125 (details in b).
- Sold equipment costing $70,875, with accumulated depreciation of $38,125, for $19,625 cash.
- Purchased equipment costing $104,375 by paying $46,000 cash and signing a long-term note payable for the balance.
- Borrowed $4,800 cash by signing a short-term note payable.
- Paid $54,125 cash to reduce the long-term notes payable.
- Issued 3,300 shares of common stock for $20 cash per share.
- Declared and paid cash dividends of $51,700.
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