Forten Company, a merchandiser, recently completed its calendar-year 2015 operat
ID: 2489548 • 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) a purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for invento and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company income statement and balance sheets follow. FORTEN COMPANY Comparative Balance Sheets December 31, 2015 and 2014 2015 2014 Assets Cash Accounts receivable $ 49,800 73,500 50,625 251,800 1,875 65,810 275,656 Prepaid expenses 1,250 Total current assets Equipment Accum. depreciation-Equipment 392,516 157,500 (36,625) (46,000) 377,800 108,000 Total assets $513,391 439,800 Liabilities and Equity Accounts payable Short-term notes payable $ 53,141 114,675 6,000 10,000 Total current liabilities Long-term notes payable 63,141 65,000 120,675 48,750 169,425 Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings 128,141 150,250 120,125 $513,391 439,800 162,750 37,500 185,000 Total liabilities and equityExplanation / Answer
Forten Company
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash flows from operating activities:
Net income 114,975
Items to reconcile net income to cash flows from operating activities
Depreciation expense 20,750
Loss on sale of equipment 5,125
Increase in accounts receivable (15,185)
Increase in merchandise inventory (23,856)
Decrease in prepaid expenses 625
Decrease in accounts payable (61,534)
Increase in short-term notes payable 4,000
Net cash flows from operating activities 44,900
Cash flows for investing activities:
Cash received from sale of equipment 11,625
Cash used to purchase equipment (30,000)
Net cash flows for investing activities (18,375)
Cash flows for financing activities:
Cash received from issuance of common stock 50,000
Cash used to pay long-term note payable (50,125)
Cash used to pay dividends (50,100)
Net cash flows for financing activities (50,225)
Net decrease in cash (23,700)
Cash balance on January 1 73,500
Cash balance on December 31 49,800