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.

Answer 1

FORTEN COMPANY
Statement of Cash Flows
For Current Year Ended December 31
Cash flows from operating activities
Net Income	110575
Adjustments to reconcile net income to net cash provided by operations:
Depreciation expense	31750
Accounts receivable increase	-20755
Inventory increase	-29356
Prepaid expense decrease	795
Accounts payable decrease	-67034
Loss on disposal of equipment	16125
Net cash provided by operating activities		42100
Cash flows from investing activities
Cash paid for equipment	-52000
Cash received from sale of equipment	22625
Net cash used in investing activities		-29375
Cash flows from financing activities:
Cash borrowed on short-term note	5100
Cash paid on long-term note	-55625
Cash received from issuing stock	72000
Cash paid for dividends	-52300
Net cash used in financing activities		-30825
Net increase (decrease) in cash		-18100
Cash balance at beginning of year		84500
Cash balance at end of year		66400