Question

Required information (The following information applies to the questions displayed below.] 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. ook FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 ant 2017 2016 Assets Cash ences $ 54,400 7e,310 280,156 1,280 $76,5ee 53,625 254,800 2,005 386,930 111,000 (47,500) $450,430 Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment 406,146 154,s00 (38,125) $522,521 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 $ 56,141 10,900 67,041 63,500 130,541 $119,175 6,600 125,775 51,750 177,525 168,750 40,500 182,730 $522,521 153,250 119,655 $450,430

Answer 1

The statement of cash flow determines the changes in cash by calculating cash flow from operating, investing and financing activities.

indirect method:- operating activities section starts with net income and add back non cash expense and add/less changes in current assets and liabilities.investing activities records changes in non current assets like purchase of equipment. cash flow from financing activities records changes in non current liabilities like long term notes and equity section of balance sheet.

statement of cash flow

cash flow from operating activities
Net income	$113,775
adjustments
depreciation expense	$23,750
Loss on sale of equipment	$8,125
(increase)/decrease in account receivable [70310-53625]	($16,685)
(increase)/decrease in inventory [280156-254800]	($25,356)
(increase)/decrease in prepaid expense [2005-1280]	$725
increase/(decrease) in account payable [56141-119175]	($63,034)
cash flow from operating activities [113775+23750+8125-16685-25356+725-63034]		$41,300
cash flow from investing activities
cash paid for equipment	($36000)
cash received from sale of equipment	$14,625
net cash used in investing activities [-36000+14625]		($21,375)
cash flow financing activities
cash borrowed on short term note [10900-6600]	$4,300
cash paid on long term note [NOTE 1]	($51,625)
cash received from issuing stock [ 2800*$20]	$56,000
cash paid for dividend	($50,700)
Net cash used in financing activities [4300-51625+56000+50700]		($42,025)
net increase (decrease) in cash [41300-21375-42025]		($22,100)
cash balance at the beginning of year		$76,500
cash balance at the end of year [-22100+76500]		$54,400

NOTE 1 : - long term notes paid = beginning long term notes + issued - ending long term notes

=51750+ [99375 equipment purchased-cash paid 36000]-63500

=51,625$