Forten Company, a merchandiser, recently completed its calendar-year 2016 operat

Question

Forten Company, a merchandiser, recently completed its calendar-year 2016 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. FORTEN COMPANY Comparative Balance Sheets December 31, 2016 and 2015 Assets Cash Accounts receivable $ 30.144 62.000 65 12551,12 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 Pald-in capital in excess of par, common stock Retained earnings Total liabilities and equity 71,375 480.575 425 525 s 60,075 S 108.200 6075200 3.000 04.250 145200 38 17 52.500145.000 22.500 480.576 425525 FORTEN COMPANY Income Statement For Year Ended December 31, 2016 5 585.000 Cost of goods sold Gross prof 299.000 18.000 140000 158.000 Other gains (losses) Loss on sale of equipment Income txes expense Net income 111,000 Additional Information on Year 2016 Transactions a The loss on the cash sale of equipment was $4,000 (details in b). b. Sold equipment costing $43,300, with accumulated depreciation of $25,200, for $14,100 cash. e. Purchased equipment costing $85,300 by paying $40,000 cash and signing a long- term note payable for the balance d. Borrowed $2,000 cash by signing a short-term note payable . Paid $40,125 cash to reduce the long-term notes payable t Issued 1,500 shares of common stock for $20 cash per share. . Declared and paid cash dividends of $45,000

Explanation / Answer

FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2016 Cash flows from operating activities Net Income $111,000 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 18,000 Accounts receivable increase -14,000 Inventory increase -24,106 Prepaid expense decrease 400 Accounts payable decrease -48,125 Loss on disposal of equipment 4,000 Net cash provided by operating activities 47169 Cash flows from investing activities Cash paid for equipment -40,000 Cash received from sale of equipment 14,100 Net cash used in investing activities -25900 Cash flows from financing activities: Cash borrowed on short-term note 2,000 Cash paid on long-term note -40,125 Cash received from issuing stock 1500*20 30,000 Cash paid for dividends -45,000 Net cash used in financing activities -53125 Net increase (decrease) in cash -31856 Cash balance at beginning of year 62,000 Cash balance at end of year 30144

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