Forten Company, a merchandiser, recently completed its calendar-year 2015 operat
ID: 2475351 • Letter: F
Question
Forten Company, a merchandiser, recently completed its calendar-year 2015 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.
2015
2014
Declared and paid cash dividends of $55,200.
Prepare a complete statement of cash flows; report its operating activities according to the direct method.(Amounts to be deducted should be indicated with a minus sign.)
Forten Company, a merchandiser, recently completed its calendar-year 2015 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.
Explanation / Answer
FORTEN COMPANY
Statement of Cash Flows
For The Period Ended 31 December 2015
Particulars
Amount
Net income
$117,900
Items to reconcile net income to cash flows from operating activities
Depreciation expense
$20,000
Loss on sale of equipment
$5,500
Increase in accounts receivable
-$13,860
Increase in merchandise inventory
-$23,000
Decrease in prepaid expenses
$350
Decrease in accounts payable
-$16,000
Increase in short-term notes payable
$5,000
Net cash flows from operating activities
$95,890
Cash flows for investing activities:
Cash received from sale of equipment
$13,550
Cash used to purchase equipment
-$30,000
Net cash flows for investing activities
-$16,450
Cash flows for financing activities:
Cash received from issuance of common stock
$48,000
Cash used to pay long-term note payable
-$54,125
Cash used to pay dividends
-$55,200
Net cash flows for financing activities
-$61,325
Net decrease in cash
$18,115
Cash balance on 01 January 2015
$74,000
Cash balance on 31 December 2015
$92,115
FORTEN COMPANY
Statement of Cash Flows
For The Period Ended 31 December 2015
Particulars
Amount
Net income
$117,900
Items to reconcile net income to cash flows from operating activities
Depreciation expense
$20,000
Loss on sale of equipment
$5,500
Increase in accounts receivable
-$13,860
Increase in merchandise inventory
-$23,000
Decrease in prepaid expenses
$350
Decrease in accounts payable
-$16,000
Increase in short-term notes payable
$5,000
Net cash flows from operating activities
$95,890
Cash flows for investing activities:
Cash received from sale of equipment
$13,550
Cash used to purchase equipment
-$30,000
Net cash flows for investing activities
-$16,450
Cash flows for financing activities:
Cash received from issuance of common stock
$48,000
Cash used to pay long-term note payable
-$54,125
Cash used to pay dividends
-$55,200
Net cash flows for financing activities
-$61,325
Net decrease in cash
$18,115
Cash balance on 01 January 2015
$74,000
Cash balance on 31 December 2015
$92,115