Forten Company, a merchandiser, recently completed its calendar-year 2015 operat
ID: 2491508 • Letter: F
Question
Forten Company, a merchandiser, recently completed its calendar-year 2015 operations. For the year, all sales are credit sales, all credits to Accounts Receivable reflect cash receipts from customers, all purchases of inventory are on credit. all debits to Accounts Payable reflect cash payments for inventory, and 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 2015 Transactions The loss on the cash sale of equipment was $4,250 (details in b). Sold equipment costing $44,550, with accumulated depreciation of $25,700, for $14,600 cash. Purchased equipment costing $86,800 by paying $50,000 cash and signing a long-term note payable for the balance. Borrowed $3,000 cash by signing a short-term note payable. Paid $42,125 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 $49,000. Required: 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.)Explanation / Answer
Cash flows from operating activities Net income 133,400.00 Adjustments for: Depreciation and amortization 19,000.00 Loss on sale of facility 4,250.00 156,650.00 Increase in trade receivables (16,000.00) Increase in inventories (26,606.00) Decrease in trade payables (50,625.00) Decrease in prepaid Expense 450.00 Increase in short term notes payable 3,000.00 Decrease In long term notes payable (42,125.00) Cash generated from operations (131,906.00) Cash flows from investing activities Purchase of property, plant, and equipment (50,000.00) Proceeds from sale of equipment 14,600.00 Net cash used in investing activities (35,400.00) Cash flows from financing activities Proceeds from issue of common stock 50,000.00 Dividends paid (49,000.00) Net cash used in financing activities 1,000.00 Net increase in cash and cash equivalents (9,656.00) Cash and cash equivalents at beginning of period 67,000.00 Cash and cash equivalents at end of period 57,344.00