Question

Forten Company's current year income statement, comparative balance sheets, and additional information follow. 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,

Additional Information on Current Year Transactions

a. The loss on the cash sale of equipment was $19.125 (details in b].

b. Sold equipment costing $88.875, with accumulated depreciation of $44,125, for $25.625 cosh.

c. Purchased equipment costing $110,375 by paying $58.000 cash and signing a long-term note payable for the balance.

d. Bonowed $5.400 cash by signings short-term note payable. 

e. Paid $57,125 cash to reduce the long-term notes payable.

f. issued 3,900 shares of common stock for $20 cash per share.

g. Declared and pala cash dividends of $52.800.

Required:

1. Prepare a complete statement of cash flows using the indirect method for the current year. 

Answer 1

109,375 FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from Operating Activities Net Income Adjustment to reconcile net income to net cash provided by operations: Depreciation expense Loss on sale of Equipment Increase in Accounts receivable (86,910 - 64,625) Increase in Inventory (296,656 - 265,800) Decreaes in Prepaid Expense (1,350 - 2,175) Decrease in Accounts payable (67,141 - 135,675) Net Cash Provided By Operating Activities 34,750 19,125 (22,285) (30,856) 825 (68,534) 42,400 Cash flows from Investing Activities Sale of Equipment Purchase of Equipment Net Cash used by Investing Activities 25,625 (58,000) (32,375) Cash Flows from Financing Activities Borrowed short-term note Repayment of Long-term note Issue of common stock (3,900 x 20) Payment of Dividend Net Cash used by Financing Activities Net Increase (decrease) in cash Cash Balance December 31, Prior year Cash Balance December 31, Current year 5,400 (57,125) 78,000 (52,900) (26,625) (16,600) 87,500 70,900

FORTEN COMPANY Spreadsheet for Statement of Cash Flows For Year Ended December 31 Analysis of Change December 31, Prior Year December 31, Current year Debit Credit Balance Sheet - Debit Cash Accounts receivable Inventory Prepaid Expense Equipment 22,285 30,856 87,500 64,625 [b] 265,800 (c) 2,175 122,000 [i] 542,100 70,900 86,910 296,656 1,350 143,500 599,316 [d] [g] 825 88,875 110,375 [f] 34,750 [g] [e] 44,125 68,534 Balance Sheet - Credit Accumulated Depreciation - Equipment Accounts payable Short-term notes payable Long-term notes payable Common stock,$5 par value Paid-in capital in excess of par value, Common stock Retained Earnings 53,000 135,675 8,800 62,750 164,250 [k] 57,125 [h] 5,400 52,375 19,500 58,500 109,375 43,625 67,141 14,200 58,000 183,750 58,500 174,100 599,316 [m] 52,900 [a] 117,625 542,100

109,375 22,285 30,856 825 68,534 [f] 34,750 19,125 Operating Activities Net Income Increase in Accounts receivable Increase in Inventory Decrease in Prepaid expenses Decrease in Accounts payable Depreciation expense Loss on sale of equipment Investing Activities Receipt from sale of equipment Payment of purchase equipment Financing Activities Borrowed on short-term note Payment on long-term note Issued common stock for cash Payment of cash dividends Non cash Investing and Financing Activities Purchase of equipment financed by long term note payable 25,625 [i] 58,000 [j] 5,400 57,125 [U] 78,000 52,900 [i] 52,375 711,675 52,375 711,675 Note Increase in Common stock (3,900 shares x $5 per share) Increase in Additional paid in capital (3,900 shares x $ 15 per share) Total Value of Shares issued (3,900 shares x $ 20 per share) 19,500 58,500 78,000 Equipment purchase cost Less: Cash paid Note issued in exchange of Equipment 110,375 (58,000) 52,375