Forten Company, a merchandiser, recently completed its calendar-year 2017 operat
ID: 2436940 • Letter: F
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 FORTEN COMPANY Compar ative Balance Sheets December 31, 2017 and 2016 2017 2016 Assets $ 54, 400 70, 310 280, 156 1, 280 406, 146 154, 500 (38, 125) 522, 521 $ 76, 500 53, 625 254, 800 2, 005 386, 930 111, 000 (47. 500) $450, 430 Accounts receivable Inventory 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 1iabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained eamings Total liabilities and equity $56, 141 10, 900 67, 041 63, 500 130, 541 $119, 175 6, 600 125, 775 51, 750 177, 525 168, 750 40, 500 182, 730 $ 522, 521 153, 250 119, 655 $450, 430 FORTEN COMP ANY Income Statement For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses $597, 500 288, 000 309, 500 $23, 750 135, 400 Depreciation expense Other expenses Other gains (losses) 159, 150 Loss on sale of equipment Income before taxes Income taxes expense Net income (8, 125) 142, 225 28, 450 $113, 775Explanation / Answer
Answer:
FORTEN COMPANY
Statement of Cash Flows
For Year Ended December 31, 2017
Amount $
Amount $
Cash flows from operating activities
Net income
113775
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in accounts receivable (70310-53625)
-16685
Increase in inventory (280156-254800)
-25356
Decrease in prepaid expenses (2005-1280)
725
Decrease in accounts payable (56141-119175)
-63034
Depreciation expense
23750
Loss on disposal of equipment
8125
-72475
Net cash provided by operating activities
41300
Cash flows from investing activities
Cash received from sale of equipment
14625
Cash paid for equipment
-36000
Net cash used in investing activities
-21375
Cash flows from financing activities
Cash borrowed on short-term note
4300
Cash paid on long-term note
-51625
Cash received from issuing stock (2800*20)
56000
Cash paid for dividends
-50700
Net cash used in financing activities
-42025
Net decrease in cash
-22100
Cash balance at beginning of 2017
76500
Cash balance at end of 2017
54400
Noncash investing and financing activities
Purchased equipment for $99,375 by signing a $63,375 long-term note payable
FORTEN COMPANY
Statement of Cash Flows
For Year Ended December 31, 2017
Amount $
Amount $
Cash flows from operating activities
Net income
113775
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in accounts receivable (70310-53625)
-16685
Increase in inventory (280156-254800)
-25356
Decrease in prepaid expenses (2005-1280)
725
Decrease in accounts payable (56141-119175)
-63034
Depreciation expense
23750
Loss on disposal of equipment
8125
-72475
Net cash provided by operating activities
41300
Cash flows from investing activities
Cash received from sale of equipment
14625
Cash paid for equipment
-36000
Net cash used in investing activities
-21375
Cash flows from financing activities
Cash borrowed on short-term note
4300
Cash paid on long-term note
-51625
Cash received from issuing stock (2800*20)
56000
Cash paid for dividends
-50700
Net cash used in financing activities
-42025
Net decrease in cash
-22100
Cash balance at beginning of 2017
76500
Cash balance at end of 2017
54400