Question

Required information [The following information applies to the questions displayed below.) 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. FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $ 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 64,750 212,625 166,250 186,750 61,500 172,540 $ 561,731 117,265 $ 496,140

Answer 1

FORTEN COMPANY
Statement of Cash Flows (Indirect)
For Year Ended December 31, 2013
Cash flows from operating activities
Net Income	$ 108,575
Adjustments to reconcile net income to net cash provided by operations:
Depreciation expense	$   36,750
Accounts receivable increase	$ (23,305)		89930-66625
Inventory increase	$ (31,856)		299656-267800
Prepaid expense decrease	$         845		1370-2215
Accounts payable decrease	$ (69,534)		69141-138675
Loss on disposal of equipment	$   21,125
Net cash provided by operating activities		$ 42,600
Cash flows from investing activities
Cash paid for equipment	$ (62,000)
Cash received from sale of equipment	$   27,625
Net cash used in investing activities		$ (34,375)
Cash flows from financing activities:
Cash borrowed on short-term note	$      5,600
Cash paid on long-term note	$ (58,125)
Cash received from issuing stock	$   82,000
Cash paid for dividends	$ (53,300)
Net cash used in financing activities		$ (23,825)
Net increase (decrease) in cash		$ (15,600)
Cash balance at beginning of year		$ 89,500
Cash balance at end of year		$ 73,900
Non cash investing financing activities
Note issued for purchase of equipment	50375

FORTEN COMPANY
Spreadsheet for Statement of Cash Flows
For Year Ended December 31, 2013
		Analysis of Changes
	2016	Debit		Credit		2017
Balance sheet—debits
Cash	$89,500					$73,900
Accounts receivable	66,625	(b)	$23,305			$89,930
Merchandise inventory	267,800	(c)	$31,856			$299,656
Prepaid expenses	2,215			(d)	$845	$1,370
Equipment	124,000	(h)	112,375	(g)	94,875	$141,500
	$550,140					$606,356
Balance sheet--credits
Accum. depreciation—Equip.	$54,000	(g)	46,125	(f)	36,750	$44,625
Accounts payable	138,675	(e)	69,534			69,141
Short-term notes payable	9,200			(j)	5,600	14,800
Long-term notes payable	64,750	(k)	58,125	(i)	50,375	57,000
Common stock, $5 par value	166,250			(l)	20,500	186,750
Paid-in capital in excess of	0			(l)	61,500	61,500
par value, common stock
Retained earnings	117,265	(m)	53,300	(a)	108,575	172,540
	$550,140					$606,356
Statement of cash flows
Operating activities
Net income		(a)	108,575
Increase in accts. receivable				(b)	23,305
Increase in merch. inventory				(c)	31,856
Decrease in prepaid expenses		(d)	$845
Decrease in accounts payable				(e)	69,534
Depreciation expense		(f)	36,750
Loss on sale of equipment		(g)	21,125
Investing activities
Receipt from sale of equipment		(g)	27,625
Payment to purchase equipment				(h)	62,000
Financing activities
Borrowed on short-term note		(j)	5,600
Payment on long-term note				(k)	58,125
Issued common stock for cash		(l)	82,000
Payments of cash dividends				(m)	53,300
Noncash investing and financing activities
Purchase of equip. financed
by long-term note payable		(i)	50,375	(h)	50,375
			$727,515		$727,515

FORTEN COMPANY
Statement of Cash Flows (Direct)
For Year Ended December 31, 2013
Cash flows from operating activities
Cash received from customers	$ 639,195
cash paid for merchandisr	$ (402,390)
Cash paid for other expenses	$ (147,555)
Cash paid for taxes	$   (46,650)
Net cash provided by operating activities		$ 42,600
Cash flows from investing activities
Cash paid for equipment	$   (62,000)
Cash received from sale of equipment	$     27,625
Net cash used in investing activities		$ (34,375)
Cash flows from financing activities:
Cash borrowed on short-term note	$       5,600
Cash paid on long-term note	$   (58,125)
Cash received from issuing stock	$     82,000
Cash paid for dividends	$   (53,300)
Net cash used in financing activities		$ (23,825)
Net increase (decrease) in cash		$ (15,600)
Cash balance at beginning of year		$ 89,500
Cash balance at end of year		$ 73,900

Working:

Accounts receivable
Balance	66625
sales	662500	cash paid	639195
closing balance	89930
Inventory
Balance	267800
Purchases	332856	cost of goods sold	301000
closing balance	299656

Accounts Payable
		balance	138675
cash paid	402390	Purchases	332856
		balance	69141
Expenses
Balance	2215
cash paid	147555	expenses	148400
closing balance	1370