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 $6,125 (details in b ).

b. Sold equipment costing $49,875, with accumulated depreciation of $31,125, for $12.625 cash.

c. Purchased equipment costing $97,375 by paying $32,000 cash and signing a long-term note payable for the balance.

d. Borrowed $4,100 cash by signing a short-term note payable

e. Paid $50,625 cash to reduce the long-term notes payable,

f. Issued 2.600 shares of common stock for $20 cash per share.

9. Declared and paid cash dividends of $50.300.

Required:

1. Prepare a complete statement of cash flows using the indirect method for the current year. (Amounts to be deducted should indicated with o minus sign.)

Answer 1

Spreadsheet for statement of cash flows
For current year ended December 31
		Analysis of change
Particulars	December 31, Prior Year	Debit	Credit	December 31, Current Year
Balance Sheet Debit
Cash	$74,500.00		-$23,100.00	$51,400.00
Accounts Receivable	$51,625.00	$15,685.00		$67,310.00
Inventory	$2,52,800.00	$24,356.00		$2,77,156.00
Prepaid Expenses	$2,025.00		-$725.00	$1,300.00
Equipment	$1,09,000.00	$47,500.00		$1,56,500.00
	$4,89,950.00			$5,53,666.00
Balance Sheet Credit
Accumulated Depreciation - Equipment	$46,500.00		-$9,375.00	$37,125.00
Accounts Payable	$1,16,175.00	$62,034.00		$54,141.00
Short term notes payable	$6,200.00		-$4,100.00	$10,300.00
Long Term Notes Payable	$49,750.00		-$14,750.00	$64,500.00
Common Stock $ 5 per share	$1,51,250.00		-$13,000.00	$1,64,250.00
Paid-in Capital in excess of par value commion stock	$0.00		-$39,000.00	$39,000.00
Retained earning	$1,20,075.00		-$64,275.00	$1,84,350.00
	$4,89,950.00			$5,53,666.00
	Forten Company
	Statement of Cash Flows
	December 31
	A) Cash Flows from Operating Activities	Details	Amount
	Net Income	$1,14,575.00
	Adjustment to reconcile Net income to net cash provided by operations:-
	Depreciation expense	$21,750.00
	Loss on sale of equipment	$6,125.00
	Increase in short term notes payable	$4,100.00
	Increase in Accounts Receivables	-$15,685.00
	Increase in Inventory	-$24,356.00
	Decrease in prepaid expense	$725.00
	Decrease in Accounts payable	-$62,034.00
	Cash flow from Operations		$45,200.00
	B) Cash Flows from Investing Activities
	Purchase of Equipment	-$32,000.00
	Sale of Equipment	$12,625.00
	Cash Flow used in Investing Activities		-$19,375.00
	C) Cash Flows from Financing Activities
	Issue of share capital	$52,000.00
	Repayment of Long term notes payable	-$50,625.00
	Dividend paid	-$50,300.00
	Cash flow used in financing activities		-$48,925.00
	Net Increase / (Decrease) in Cash		-$23,100.00
	Cash Balance at December 31, Prior Year		$74,500.00
	Cash Balance at December 31, Current Year		$51,400.00