Use the following information for the Problems below. Forten Company, a merchand
ID: 2551256 • Letter: U
Question
Use the following information for the Problems below.
Forten Company, a merchandiser, recently completed its calendar-year 2017 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.
Additional Information on Year 2017 Transactions
The loss on the cash sale of equipment was $13,125 (details in b).
Sold equipment costing $70,875, with accumulated depreciation of $38,125, for $19,625 cash.
Purchased equipment costing $104,375 by paying $46,000 cash and signing a long-term note payable for the balance.
Borrowed $4,800 cash by signing a short-term note payable.
Paid $54,125 cash to reduce the long-term notes payable.
Issued 3,300 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $51,700.
Required:
1. 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.)
Comparative Balance Sheets
December 31, 2017 and 2016 2017 2016 Assets Cash $ 61,900 $ 81,500 Accounts receivable 77,850 58,625 Inventory 287,656 259,800 Prepaid expenses 1,290 2,055 Total current assets 428,696 401,980 Equipment 149,500 116,000 Accum. depreciation—Equipment (40,625 ) (50,000 ) Total assets $ 537,571 $ 467,980 Liabilities and Equity Accounts payable $ 61,141 $ 126,675 Short-term notes payable 12,400 7,600 Total current liabilities 73,541 134,275 Long-term notes payable 61,000 56,750 Total liabilities 134,541 191,025 Equity Common stock, $5 par value 178,750 158,250 Paid-in capital in excess of par, common stock 45,500 0 Retained earnings 178,780 118,705 Total liabilities and equity $ 537,571 $ 467,980
Explanation / Answer
STATEMENT SHOWING CASH FLOWS: Cashflows from Operating Activities: Net Income from operations 111775 Adjustment to reconcile net income to net cash provided: Depreciation expense 28750 Loss on sale of equipment 13125 Increase in Accounts rececivable -19225 Increase in Inventory -27856 Decrease in Prepaid expense 765 Decrease in Accounts payable -65534 Increase in Short term notes payable 4800 Net cash provided from Operating Activities 46600 Cashflows from Investing Activities: Sale of equipment 19625 Purchase of Equipment -46000 Net cash used in Investing Activities -26375 Cashflows from Financing Activities Retirement of Long term notes payable -54125 Dividend paid -51700 Issue of c ommon Stock 66000 Net cash used in Financing Actvities -39825 Net cash rreduced during the year -19600 Beginning Cash 81500 Ending cash 61900