Question

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.

FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016
	2017				2016
Assets
Cash	$	55,900			$	77,500
Accounts receivable		71,810				54,625
Inventory		281,656				255,800
Prepaid expenses		1,250				1,975
Total current assets		410,616				389,900
Equipment		153,500				112,000
Accum. depreciation—Equipment		(38,625	)			(48,000	)
Total assets	$	525,491			$	453,900
Liabilities and Equity
Accounts payable	$	57,141			$	120,675
Short-term notes payable		11,200				6,800
Total current liabilities		68,341				127,475
Long-term notes payable		63,000				52,750
Total liabilities		131,341				180,225
Equity
Common stock, $5 par value		170,750				154,250
Paid-in capital in excess of par, common stock		41,500				0
Retained earnings		181,900				119,425
Total liabilities and equity	$	525,491			$	453,900

  

FORTEN COMPANY Income Statement For Year Ended December 31, 2017
Sales				$	602,500
Cost of goods sold					289,000
Gross profit					313,500
Operating expenses
Depreciation expense	$	24,750
Other expenses		136,400			161,150
Other gains (losses)
Loss on sale of equipment					(9,125	)
Income before taxes					143,225
Income taxes expense					29,850
Net income				$	113,375

Additional Information on Year 2017 Transactions

1. Net income was $113,375.
2. Accounts receivable increased.
3. Inventory increased.
4. Prepaid expenses decreased.
5. Accounts payable decreased.
6. Depreciation expense was $24,750.
7. Sold equipment costing $58,875, with accumulated depreciation of $34,125, for $15,625 cash. This yielded a loss of $9,125.
8. Purchased equipment costing $100,375 by paying $38,000 cash and (i.) by signing a long-term note payable for the balance.
9. Borrowed $4,400 cash by signing a short-term note payable.
10. Paid $52,125 cash to reduce the long-term notes payable.
11. Issued 2,900 shares of common stock for $20 cash per share.
12. Declared and paid cash dividends of $50,900.

  
Required:
Prepare a complete statement of cash flows using a spreadsheet; report its operating activities using the indirect method. (Enter all amounts as positive values.)

Answer 1

Forten Company Prepare a complete statement of cash flows using a spreadsheet; Spreadsheet for Statement of Cashflows For the Year ended December 31,2017 Analysis of Change DebitCredit December 31,2016 December 31,2017 Balance sheet- debit Cash Accounts Receivable Invento Prepaid Expenses Equipment 55900 71810 281656 1250 153500 21600 77500 54625 255800 1975 112000 17185 25856 725 41500 Balance sheet Credit Accumulated Depreciation Equi Accounts Payable Short Term Notes Payable Long Term Notes Payable Common Stock $5 par value Paid in Capital in excess of par value, common stock Retained Earnings 38625 57141 11200 63000 170750 41500 181900 9375 48000 120675 6800 52750 154250 0 119425 63534 4400 10250 16500 41500 62475

Statement of Cashflows For the Year ended December 31,2017 Cashflow from Operating Activity Net Income Adjustments: Depreciation Loss on sale of equipment Accounts receivable increased Inventory increased Prepaid expenses decreased Accounts payable decreased Cash generated from Operating Activity 113375 24750 9125 17185 25856 725 63534 -71975 41400 Cashflow from Investing Activity Equipment Purchased Equipment sold Cash used for Investing Activity 38000 15625 22375 Cashflow from Financing Activity Common Stock Issued Paid in Capital in excess of par value, common stock Dividends Paid Short Term Note issued Long Term Note paid Cash used for Financing Activity Net Decrease in cash Beginning Cash Balance Ending Cash Balance 16500 41500 50900 4400 52125 -40625 21600 77500 55900

Equipment 112000 Sale Bal Cash Note Payable 58875 38000 62375 153500 212375 Bal 212375 Accum. Depre 34125 Bal Sale 48000 Depre 24750 Bal 38625 Sale of Equip 58875 Accum Depre Equip 34125 9125 15625 58875 Loss on sale Cash 58875