Forten Company, a merchandiser, recently completed its calendar-year 2015 operat
ID: 2500486 • 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 $4,500 (details in b).
Sold equipment costing $45,800, with accumulated depreciation of $26,200, for $15,100 cash.
Purchased equipment costing $88,300 by paying $63,000 cash and signing a long-term note payable for the balance.
Borrowed $4,000 cash by signing a short-term note payable.
Paid $44,125 cash to reduce the long-term notes payable.
Issued 3,500 shares of common stock for $20 cash per share.
Prepare a complete statement of cash flows; report its operating activities using the indirect method.(Amounts to be deducted should be indicated with a minus sign.)
Forten Company, a merchandiser, recently completed its calendar-year 2015 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s income statement and balance sheets follow.
Explanation / Answer
Answer: FORTEN COMPANY
Satatement of Cash Flows For The Year Ended 31 Dec, 2015
Cash Flows from Operating Activities:
Net Income...........................................................................................$ 145,200
Dep Expenses..............................................$ 20,000
Loss on sale of equipment.............................$ 4,500
Increase in Account Recivable.......................$ ( 18,000)
Increase in Inventory.....................................$ ( 29,106 )
Decrease in prepaid expenses.......................$ 500
Decrease in accounts payable.......................$ ( 53,125 )
Increase in short term notes payable..............$ 4,000
TOTAL........$ ( 71,231)
Net cash flow from operating activities............( 145,200 + ( 71231 ) .............$ 73,969
Cash Flows For Investing Activities :
Cash received from sale of equipment............................................................ $ 15,100
Cash used to purchase equipment.................................................................$ ( 63,000 )
Net Cash flow from Investing activities.......................................................$ 26,069
Cash Flows from Financing Activities :
Cash received from issuance of common stock...............................................$ 70,000
Cash used to pay long term notes payable.....................................................$ ( 44,125 )
Cash used to pay dividend.............................................................................$ ( 53,000 )
Net cash flow from financing activities............................................................ $ ( 1,056 )
Net Decrease in cash...........................................................................$ ( 1,056 )
( $ 70,944 - $ 72,000 ) = $ ( 1,056 )