Forten Company, a merchandiser, recently completed its calendar-year 2015 operat
ID: 2485098 • 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
The loss on the cash sale of equipment was $4,300 (details in b).
Sold equipment costing $44,800, with accumulated depreciation of $25,800, for $14,700 cash.
Purchased equipment costing $87,100 by paying $50,000 cash and signing a long-term note payable for the balance.
Borrowed $3,200 cash by signing a short-term note payable.
Paid $42,525 cash to reduce the long-term notes payable.
Issued 2,700 shares of common stock for $20 cash per share.
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, 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.
FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2015 Cash flows from operating activities Net Income Adjustments to reconcile net income to net cash provided by operations: Adjustments to reconcile net income to net c 0 Cash flows from investing activities Cash flows from financing activities: Net increase (decrease) in cash Cash balance at beginning of year Cash balance at end of year 0 0Explanation / Answer
Indirect Method Cash Flow Statement Cash Flows From Operating Activities $ $ Net Profit Before Taxation And Extraordinary Item 152,500 Adjustments:- Loss on Sale Of Equipment 4,300 Depreciation 19,200 23,500 Operating profit before working capital changes 176,000 Working capital changes: Increase in Current Assets (-) Inventory -27,106 Accounts Receivable (Net) -16,400 Decrease in Current Assets (+) Prepaid Expenses 460 Increase in Current Liabilities (+) Decrease in Current Liabilities (-) Accounts Payable -51,125 -94,171 Income Tax Payable Cash Generated From Operations 81,829 Interest Exp. Income tax Paid -29,000 Cash Flow Before Extraordinary Item Net cash from operating activities 52,829 Cash Flows From Investing Activities Cash receipts from Sale/Disposal of Equipment 14,700 Cash paid for Purchase/Acquisition of Equipment -50,000 Net cash from/used in investing activities -35,300 Cash Flows From Financing Activities Cash receipts from Issue/Sale/Disposal of Common Stock 13,500 Paid-in capital in excess of par, common stock 40,500 Short Term Notes payable 3,200 Cash paid for Purchase/Acquisition/Repayment of Dividend Paid -49,800 Long term Notes Payable -42,525 Net cash used in financing activities -35,125 Net increase in cash and cash equivalents -17,596 Cash and cash equivalents at beginning of period 68,000 Cash and cash equivalents at end of period 50,404