Question

Indirect: Statement of cash flows Forten Company, a merchandiser, recently completed its calendar-year 2019 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 balance sheets follow. 2019 2018 Assets Cash $ 49,800 $ 73,500 Accounts receivable 65,810 50,625 Inventory 275,656 251,800 Prepaid expenses 1.250 1.875 Total current assets 392,516 377.800 Equipment 157,500 108,000 Accum. depreciation Equipment (36.625) (46,000 Total assets $513.391 $439,800 Liabilities and Equity Accounts payable S53,141 $114.675 Short-term notes payable 10.000 6.000 Total current liabilities 63,141 120,675 Long-term notes payable 65.000 48.750 Total liabilities 128,141 169,425 Equity Common stock, $5 par value 162.750 150,250 Paid-in capital in excess of par, common stock 0 Retained earnings 185.000 120.125 Total liabilities and equity $513.391 $439.800 Additional Information on Year 2019 Transactions a. The loss on the cash sale of equipment was $5,125 (details in b). b. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash. c. Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term note payable for the balance. d. Borrowed $4,000 cash by signing a short-term note payable. e. Paid $50,125 cash to reduce the long-term notes payable. f. Issued 2,500 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $50,100. h. Depreciation expense was $ 20,750. i. Net income was $114,975. Required Prepare a complete statement of cash flows; report its operating activities using the indirect method. Disclose any noncash investing and financing activities in a note.

Answer 1

Statement of cash flow
Cash flows from operating activities
net income					114,975
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation expense					20,750
loss on sale of Equipment					5,125
increase in account receivable					-15185
increase in inventory					-23856
Decrease in prepaid expense					625
Decrease in accounts payable					-61534
net cash provided by operating activities						40,900
Cash from investing activities
cash from sale of Equipment					11,625
cash for purchase of Equipment					-30000
Cash used fro investing activities						-18,375
Cash from financing activities
Cash from short term notes payable					4,000
Cash paid for long term notes payable					-50,125
Cash from stock issue					50000
paid cash dividend					-50,100
Cash used for financing activity						-46,225
Net decrease in cash						-23,700
Cash at the beginning og the year						73500
Cash at year end						49,800
non cash financing and investing activity
purchase of equipment financed by long term notes payable						66375