[The following information applies to the questions displayed below.] Forten Com
ID: 2429976 • Letter: #
Question
[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.
Problem 12-3A Indirect: Statement of cash flows LO A1, P1, P2, P3
Additional Information on Year 2017 Transactions
The loss on the cash sale of equipment was $9,125 (details in b).
Sold equipment costing $58,875, with accumulated depreciation of $34,125, for $15,625 cash.
Purchased equipment costing $100,375 by paying $38,000 cash and signing a long-term note payable for the balance.
Borrowed $4,400 cash by signing a short-term note payable.
Paid $52,125 cash to reduce the long-term notes payable.
Issued 2,900 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $50,900.
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.)
Comparative Balance Sheets
December 31, 2017 and 2016 2017 2016 Assets Cash $ 55,900 $ 77,500 Accounts receivable 71,810 54,625 Inventory 281,656 255,800 Prepaid expenses 1,250 1,975 Total current assets 410,616 389,900 Equipment 153,500 112,000 Accum. depreciation—Equipment (38,625 ) (48,000 ) Total assets $ 525,491 $ 453,900 Liabilities and Equity Accounts payable $ 57,141 $ 120,675 Short-term notes payable 11,200 6,800 Total current liabilities 68,341 127,475 Long-term notes payable 63,000 52,750 Total liabilities 131,341 180,225 Equity Common stock, $5 par value 170,750 154,250 Paid-in capital in excess of par, common stock 41,500 0 Retained earnings 181,900 119,425 Total liabilities and equity $ 525,491 $ 453,900
Explanation / Answer
statement of cash flow cash flow from operating activity Net Income 113375 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 24750 Loss on sale of equipment 9125 Increase in accounts receivABle [71810-54625] (17185) increase in inventories [281656-255800] (25856) Decrease in prepaid expense [1975-1250] 725 Decrease in accounts payable [57141-120675] (63534) increase in short term note payable 4400 (67575) Net cash provided by operating activity 45800 cash flow from investing activity sale of equipment 15625 purchase of equipment [ (38000) Net cash used by investing activity (22375) cash flow from financing activity Payment of long term note payable (52125) Issue of common stock [2900*20] 58000 payment of dividend (50900) net cash used by financing activity (45025) Net increase or (decrease)in cash during the period [45800-22375-45025] (21600) Beginning cash balance 77500 cash balance at end 55900
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