[The following information applies to the questions displayed below.] Forten Com

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[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.

  

Additional Information on Year 2017 Transactions

The loss on the cash sale of equipment was $22,125 (details in b).

Sold equipment costing $97,875, with accumulated depreciation of $47,125, for $28,625 cash.

Purchased equipment costing $113,375 by paying $64,000 cash and signing a long-term note payable for the balance.

Borrowed $5,700 cash by signing a short-term note payable.

Paid $58,625 cash to reduce the long-term notes payable.

Issued 4,200 shares of common stock for $20 cash per share.

Declared and paid cash dividends of $53,500.

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
Comparative Balance Sheets
December 31, 2017 and 2016 2017 2016 Assets Cash $ 75,400 $ 90,500 Accounts receivable 91,440 67,625 Inventory 301,156 268,800 Prepaid expenses 1,380 2,235 Total current assets 469,376 429,160 Equipment 140,500 125,000 Accum. depreciation—Equipment (45,125 ) (54,500 ) Total assets $ 564,751 $ 499,660 Liabilities and Equity Accounts payable $ 70,141 $ 140,175 Short-term notes payable 15,100 9,400 Total current liabilities 85,241 149,575 Long-term notes payable 56,500 65,750 Total liabilities 141,741 215,325 Equity Common stock, $5 par value 196,750 167,250 Paid-in capital in excess of par, common stock 54,500 0 Retained earnings 171,760 117,085 Total liabilities and equity $ 564,751 $ 499,660

Explanation / Answer

Cash flow Statement: Cash flows from Operating activities: Net income for the year 108175 Adjustment required fro reconciliation Depreciation expense 37750 Loss on sale of equipment 22125 Increase in Accounts receivable -23815 Increasse in Inventory -32356 Decrease in Pprepaid expense 855 Decrease in Accounts payable -70034 Net cash provided from operating activities 42700 Cash flows from Investing activities: Sale of equipment 28625 Purchase of Equipment -64000 Net cash used in Investing activities -35375 Cash flows from Financing activities: Borrowings from short term note payable 5700 Repayment of long term note payable -58625 Dividend paid -53500 Common Stock issued (4200*20) 84000 Net cash used in Financing activities -22425 Net decrease in cash -15100 Beginning Balance n cash 90500 Ending Balance in cash 75400

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