Question

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. FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 2017 2016 $ 73,900 89,930 299,656 1,370 464,856 141,500 (44,625) $561,731 $ 89,500 66,625 267,800 2,215 426, 140 124,000 (54,000) $496,140 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term notes payable Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings Total liabilities and equity $ 69,141 14,800 83,941 57,000 140, 941 $138, 675 9,200 147,875 64,750 212,625 194,750 53,500 172,540 $561,731 166,250 0 117,265 $496,140 FORTEN COMPANY Income Statement For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 36, 750 Other expenses 148,400 Other gains (losses) Loss on sale of equipment $662,500 301,000 361,500 185,150 (21,125)

Answer 1

Statement of Cash Flows
Cash flows from operating activities:
Net income		$      1,08,575
Adjustments to reconcile net income to net cash provided by operations:
Depreciation	$           36,750
Loss on sale of equipment	$           21,125
Increase in accounts receivable (89930-66625)	$         -23,305
Increase in inventory (299656-267800)	$         -31,856
Decrease in prepaid expenses (2215-1370)	$ 845
Decrease in accounts payable (138675-69141)	$         -69,534	$        -65,975
Net cash from operating activities		$          42,600
Cash flows from investing activities:
Sale of equipment	$           27,625
Purchase of equipment	$         -62,000
Net cash used by investing activities		$        -34,375
Cash flows from financing activities:
Issue of short term note	$             5,600
Redemption of long term note	$    -58,125
Issue of common stock	$           82,000
Dividends paid	$    -53,300
Net cash used by financing activities		$        -23,825
Net decrease in cash		$        -15,600
Cash balance at the beginning of the year		$          89,500
Cash balance at the end of the year		$          73,900
Note:
Equipment purchased for $112,375 by signing a note payable for $50,375 and
cash of $62,000.