Forten Company, a merchandiser, recently completed its calendar-year 2015 operat
ID: 2584619 • 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.
Declared and paid cash dividends of $51,300.
Prepare a complete statement of cash flows; report its operating activities according to the direct 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
CASH FLOW STATEMENT UNDER DIRECT METHOD
Notes :
1) Cash receipt from customers :
Cash receipt from customers = Sales + Begining accounts receivable - Ending accounts receivable
= 582000 + 56000 - 65860
= $ 572140
2) Cash paid to suppliers :
Cash paid to suppliers = Cost of goods sold + Ending inventory - Begining inventory + Begining accounts payable - Ending accounts payable
= 290000 + 276500 - 251500 + 111000 - 95000
= $ 331000
3) Operating Expenses :
Operating Expenses = Expenses made + Ending prepaid expenses - Begining prepaid expenses
= 133600 + 1250 - 1700
= $ 133150
4) Proceeds from sale of equipment :
= Equipment costing - Accumulated depreciation - Loss on sale of equipment
= 48890 - 29625 - 5625
= $ 13640
PARTICULARS AMOUNT($) AMOUNT($) CASH FLOW FROM OPERATING ACTIVITIES Cash receipt from customers (Note 1) 572140 Cash payment to suppliers (Note 2) - 331000 Cash paid for operating expenses (Note 3) - 133150 Income tax expenses - 24250 Net cash from operating activities (Direct method) 83740 CASH FLOW FROM INVESTING ACTIVITIES Receipt from sale of equipment 13640 Purchase of equipment - 35000 Net cash used in Investing activities - 21360 CASH FLOW FROM FINANCING ACTIVITIES Proceeds from short term notes payable 4000 Payment made for long term notes payable - 52500 Proceeds from Issue of share capital 47000 Declared and paid dividend - 51300 Net cash used in Financing activity - 52800 Net Increase in cash and cash equivalents 9580 Cash and cash equivalent at the begining of period 73000 Cash and cash equivalent at the end of period 82580