Forten Company, a merchandiser, recently completed its calendar-year 2017 operat

Question

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 $5,125 (details in b).

Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash.

Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term note payable for the balance.

Borrowed $4,000 cash by signing a short-term note payable.

Paid $50,125 cash to reduce the long-term notes payable.

Issued 2,500 shares of common stock for $20 cash per share.

Declared and paid cash dividends of $50,100.

Required:
Prepare a complete statement of cash flows using a spreadsheet; report its operating activities using the indirect method. (Enter all amounts as positive values.)

FORTEN COMPANY
Comparative Balance Sheets
December 31, 2017 and 2016 2017 2016 Assets Cash $ 49,800 $ 73,500 Accounts receivable 65,810 50,625 Inventory 275,656 251,800 Prepaid expenses 1,250 1,875 Total current assets 392,516 377,800 Equipment 157,500 108,000 Accum. depreciation—Equipment (36,625 ) (46,000 ) Total assets $ 513,391 $ 439,800 Liabilities and Equity Accounts payable $ 53,141 $ 114,675 Short-term notes payable 10,000 6,000 Total current liabilities 63,141 120,675 Long-term notes payable 65,000 48,750 Total liabilities 128,141 169,425 Equity Common stock, $5 par value 162,750 150,250 Paid-in capital in excess of par, common stock 37,500 0 Retained earnings 185,000 120,125 Total liabilities and equity $ 513,391 $ 439,800

Explanation / Answer

FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities Net Income $114,975 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 20,750 Accounts receivable increase -15,185 Inventory increase -23,856 Prepaid expense decrease 625 Accounts payable decrease -61,534 Loss on disposal of equipment 5,125 Net cash provided by operating activities $40,900 Cash flows from investing activities Cash paid for equipment -30,000 Cash received from sale of equipment 11,625 Net cash used in investing activities -18375 Cash flows from financing activities: Cash borrowed on short-term note 4,000 Cash paid on long-term note -50,125 Cash received from issuing stock 50,000 Cash paid for dividends -50,100 Net cash used in financing activities -46,225 Net increase (decrease) in cash ($23,700) Cash balance at beginning of year 73,500 Cash balance at end of year 49800

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