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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
Assets
Cash		$	66,400					$	84,500
Accounts receivable			82,380						61,625
Inventory			292,156						262,800
Prepaid expenses			1,320						2,115
Total current assets			442,256						411,040
Equipment			146,500						119,000
Accum. depreciation—Equipment			(42,125	)					(51,500	)
Total assets		$	546,631					$	478,540
Liabilities and Equity
Accounts payable		$	64,141					$	131,175
Short-term notes payable			13,300						8,200
Total current liabilities			77,441						139,375
Long-term notes payable			59,500						59,750
Total liabilities			136,941						199,125
Equity
Common stock, $5 par value			179,250						161,250
Paid-in capital in excess of par, common stock			54,000						0
Retained earnings			176,440						118,165
Total liabilities and equity		$	546,631					$	478,540

  

FORTEN COMPANY Income Statement For Current Year Ended December 31
Sales				$	637,500
Cost of goods sold					296,000
Gross profit					341,500
Operating expenses
Depreciation expense	$	31,750
Other expenses		143,400			175,150
Other gains (losses)
Loss on sale of equipment					(16,125	)
Income before taxes					150,225
Income taxes expense					39,650
Net income				$	110,575

Additional Information on Current Year Transactions

1. The loss on the cash sale of equipment was $16,125 (details in b).
2. Sold equipment costing $79,875, with accumulated depreciation of $41,125, for $22,625 cash.
3. Purchased equipment costing $107,375 by paying $52,000 cash and signing a long-term note payable for the balance.
4. Borrowed $5,100 cash by signing a short-term note payable.
5. Paid $55,625 cash to reduce the long-term notes payable.
6. Issued 3,600 shares of common stock for $20 cash per share.
7. Declared and paid cash dividends of $52,300.

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

Answer 1

CashFlow Statemennt
Cashflows from Operating activities
Net income for the year		110575
Adjustment required
Depreciation			31750
loss on sale of equipment		16125
Increase in Accounts receivable		-20755
Increase in Inventory			-29356
Decrease in Prepaid expense		795
Decrease in Accounts payable		-67034
Net cash provided from Operating activities	42100
Cash flows from Investing activities
Purchase of Equipment		-52000
Sale of equipment			22625
Net cash used in Investing activities		-29375
Cashflows from Financing activities
Issuance of ST Notes payable		5100
Repayment of Long term notes payable	-55625
Issuance of shares			72000
Dividend paid			-52300
Net cash used in Financing activities		-30825
Net decrease in cash				-18100
Beginning balance of cash			84500
Ending balance of cash			66400