Use the following information for the Problems below. [The following information
ID: 2590707 • Letter: U
Question
Use the following information for the Problems below.
[The following information applies to the questions displayed 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.
Problem 12-4AA Indirect: Cash flows spreadsheet LO P1, P2, P3, P4
Additional Information on Year 2017 Transactions
Net income was $106,975.
Accounts receivable increased.
Inventory increased.
Prepaid expenses decreased.
Accounts payable decreased.
Depreciation expense was $40,750.
Sold equipment costing $106,875, with accumulated depreciation of $50,125, for $31,625 cash. This yielded a loss of $25,125.
Purchased equipment costing $116,375 by paying $70,000 cash and (i.) by signing a long-term note payable for the balance.
Borrowed $6,000 cash by signing a short-term note payable.
Paid $60,125 cash to reduce the long-term notes payable.
Issued 4,500 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $54,100.
Required:
Prepare a complete statement of cash flows using a spreadsheet; report its operating activities using the indirect method. (Enter all amounts as positive values.) Please show the work (math for getting numbers)
Comparative Balance Sheets
December 31, 2017 and 2016 2017 2016 Assets Cash $ 79,900 $ 93,500 Accounts receivable 95,970 70,625 Inventory 305,656 271,800 Prepaid expenses 1,410 2,295 Total current assets 482,936 438,220 Equipment 137,500 128,000 Accum. depreciation—Equipment (46,625 ) (56,000 ) Total assets $ 573,811 $ 510,220 Liabilities and Equity Accounts payable $ 73,141 $ 144,675 Short-term notes payable 16,000 10,000 Total current liabilities 89,141 154,675 Long-term notes payable 55,000 68,750 Total liabilities 144,141 223,425 Equity Common stock, $5 par value 202,750 170,250 Paid-in capital in excess of par, common stock 57,500 0 Retained earnings 169,420 116,545 Total liabilities and equity $ 573,811 $ 510,220
Explanation / Answer
Cash Flow Statement operating Profit 1,59,225 Income from Operating Activities +Depreciation 40,750 -Payment of Tax -52,250 -Payment of Dividend -54,100 +loss on sale of Asset 25,125 -Increasein A/R -25,345 -Increase in iNventory -33,856 +decrease in Prepaid Exp 885 -Decrease fo A/P -71,534 +increase in Short term Notes 6,000 -1,64,325 Cash from Operating Activities -5,100 Cash from Investing Activities -Purchase of Equipment -1,16,375 + sale of Equipment 31,625 -84,750 Cash from Financing Activities +Issue of Bonds for equipment 46,375 -Repayment of Long term notes -60,125 +Issue of Shares 90,000 76,250 Cash from the operation -13,600 Add: Opening Cash Balance 93,500 Closing Cash Balance 79,900 Calculation of Equipment Purchase Beg bal 1,28,000 Add: Purchase 1,16,375 Less: Sales -1,06,875 1,37,500 Calculation of Accumulated Depn Beg bal 56,000 During the year 40,750 Less: Depn on sold -50,125 Cl Bal 46,625 Sales Value of Equipment Purchase price 1,06,875 Less: Accu. Depn -50,125 Book Value 56,750 Less: sales Value -31,625 Loss on Sale -25,125