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Required information Use the following information for the Problems below. [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 $ 52,900 68,810 278,656 1,270 401,636 155,500 (37,625) $ 519,511 $ 75,500 52,625 253,800 1,995 383,920 110,000 (47,000) $ 446,920 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 $ 55,141 10,600 65,741 64,000 129,741 $ 117,675 6,400 124,075 50,750 174,825 152, 250 165,750 40,500 183,520 $ 519,511 119,845 $ 446,920

Answer 1

A FORTEN COMPANY Cash Flow Statement for the Current Year Ending December 31 Indirect Method Particulars A. Cash Flows From Operating Activities Net Income for the year (Amount in $) 114,175 22,750 7,125 144,050 Adjustments to Reconcile Net Income:- Add :Depreciation on buildings & Equipments 1 Add : Loss on sale of Equipment (W Note 1) 2 Operating Profit before working capital changes 3 Changes in Working Capital: 4 Increase in Inventory 5 Increase in Account Receivable 5 Decrease in Prepaid Expenses 7 Decrease in Account Payable 3 Total (24,856) (16,185) 725 (62,534) 41,200 Net Cash Flow From Operating Activities (A) 41,200 Hnmt

28 B. Cash Flows From Investing Activities 29 Sale of Equipment ( W Note 1) 30 Purchase of Equipment ( W Note 2) 13,625 (34,000) 32 Net Cash Flow From Investing Activities (B) (20,375) 34 C. Cash Flows From Financing Activities 35 Cash Received from issue of common stock (2700 shares * $ 20) 36 Cash Dividend Paid 37 Borrowed on short term note 38 Cash paid on Long tem note (W Note 3) 39 Net Cash Flow From Financing Activities (C) 54,000 (50,500) 4,200 (51,125) (43,425) 11 Net Increase (Decrease) in cash (A+B+C) 12 Cash Balance Prior Year,December 31 33 Cash Balance Current Year, December 31 (22,600) 75,500 52,900 35 Non Cash Investing & Financing activity :- 16 Purchase of Equipment financed by Long tem Note payable 64,375

50 51 Working Note 1 52 Sale of Equipment 53 Cost of Equipment Sold 54 Less : Accumulated Depreciation 55 Total 56 Less : Cash received on sale of equipment 57 Loss on sale of Equipment 58 59 Working Note 2 60 Purchase of Equipment 52,875 (32,125) 20,750 (13,625) 7,125 61 62 Cost of Equipment purchased 63 Less : Cash Paid on equipment purchased (Investing Activity) 64 Balance by Signing Long term note payable (Non Cash Activity) 98,375 (34,000) 64,375 65 66 67 Working Note 3 68 Long term Note Payable A/C 69 Opening Balance 70 Add : Signing Long term note payable for purchase of Equipment 71 Total 72 Less : Closing Balance 73 Cash paid on Long term Note payable 50,750 64,375 115,125 (64,000) 51,125 75