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 $9,125 (details in b ).

b. Sold equipment costing $58,875, with accumulated depreciation of $34,125, for $15,625 cash.

c. Purchased equipment costing $100,375 by paying $38,000 cash and signing a long-term note payable for the balance.

d. Borrowed $4.400 cash by signing a short-term note payable

e. Paid $52,125 cash to reduce the long-term notes payable:

f. issued 2.900 shares of common stock for $20 cash per share

g. Declared and paid cash dividends of $50,900

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

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B $ 113,375 $ 24,750 $ 9,125 $ -17,185 $ -25,856 $ 725 $ -63,534 A 1 FORTEN COMPANY 2 Statement of Cash Flows 3 For Current Year Ended December 31 4 Cash Flow from Operating Activities: 5 Net Income 6 Adjustments to reconcile net income to net cash provided by operations: 7 Depreciation expense 8 Loss on sale of Equipment 9 Increase in Accounts Receivables 10 Increase in Inventory 11 Decrease in Prepaid Expenses 12 Decrease in Accounts Payable 13 Net cash provided by operating activities 14 Cash Flow from Investing Activities: 15 Cash received from sale of Equipment 16 Cash paid for equipment 17 Net cash used in investing activities 18 Cash Flow from Financing Activities: 19 Cash borrowed on short term note 20 Cash paid on long-term note 21 Cash received from issuing stock 22 Cash paid for dividends 23 Net cash used in financing activities 24 Net increase (decrease) in cash 25 Cash balance at December 31, prior year 26 Cash balance at December 31, current year $ 41,400 $ 15,625 $ -38,000 $ -22,375 $ 4,400 $ -52,125 $ 58,000 $ -50,900 $ -40,625 $ -21,600 $ 77,500 $ 55,900

A 00 C 113375 24750 9125 =54625-71810 =255800-281656 =1975-1250 1=57141-120675 =SUM(B5:B12) 1 FORTEN COMPANY 2 Statement of Cash Flows 3 For Current Year Ended December 31 4 Cash Flow from Operating Activities: 5 Net Income 6 Adjustments to reconcile net income to net cash provided by operations: 7 Depreciation expense 8 Loss on sale of Equipment 9 Increase in Accounts Receivables 10 Increase in Inventory 11 Decrease in Prepaid Expenses 12 Decrease in Accounts Payable 13 Net cash provided by operating activities 14 Cash Flow from Investing Activities: 15 Cash received from sale of Equipment 16 Cash paid for equipment 17 Net cash used in investing activities 18 Cash Flow from Financing Activities: 19 Cash borrowed on short term note 20 Cash paid on long-term note 21 Cash received from issuing stock 22 Cash paid for dividends 23 Net cash used in financing activities 24 Net increase (decrease) in cash 25 Cash balance at December 31, prior year 26 Cash balance at December 31, current year 15625 - 38000 =+B15+B16 4400 |-52125 1=2900*20 -50900 =SUM(B19:B22) =+C13+C17+C23 77500 =+C24+C25