Question

Required information

Use the following information for the Problems below.

[The following information applies to the questions displayed below.]

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	$	51,400			$	74,500
Accounts receivable		67,310				51,625
Inventory		277,156				252,800
Prepaid expenses		1,300				2,025
Total current assets		397,166				380,950
Equipment		156,500				109,000
Accum. depreciation—Equipment		(37,125	)			(46,500	)
Total assets	$	516,541			$	443,450
Liabilities and Equity
Accounts payable	$	54,141			$	116,175
Short-term notes payable		10,300				6,200
Total current liabilities		64,441				122,375
Long-term notes payable		64,500				49,750
Total liabilities		128,941				172,125
Equity
Common stock, $5 par value		164,750				151,250
Paid-in capital in excess of par, common stock		38,500				0
Retained earnings		184,350				120,075
Total liabilities and equity	$	516,541			$	443,450

  

FORTEN COMPANY Income Statement For Year Ended December 31, 2017
Sales				$	587,500
Cost of goods sold					286,000
Gross profit					301,500
Operating expenses
Depreciation expense	$	21,750
Other expenses		133,400			155,150
Other gains (losses)
Loss on sale of equipment					(6,125	)
Income before taxes					140,225
Income taxes expense					25,650
Net income				$	114,575

Problem 12-4AA Indirect: Cash flows spreadsheet LO P1, P2, P3, P4

Additional Information on Year 2017 Transactions

1. Net income was $114,575.
2. Accounts receivable increased.
3. Inventory increased.
4. Prepaid expenses decreased.
5. Accounts payable decreased.
6. Depreciation expense was $21,750.
7. Sold equipment costing $49,875, with accumulated depreciation of $31,125, for $12,625 cash. This yielded a loss of $6,125.
8. Purchased equipment costing $97,375 by paying $32,000 cash and (i.) by signing a long-term note payable for the balance.
9. Borrowed $4,100 cash by signing a short-term note payable.
10. Paid $50,625 cash to reduce the long-term notes payable.
11. Issued 2,600 shares of common stock for $20 cash per share.
12. Declared and paid cash dividends of $50,300.

  
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

f51625-67310 B8 FORTEN COMPANY Statement of Cash Flow As on Dec 31, 2017 Amount AmountCalculations 4 5 I. Cash Flow from Operating Activities 6 Net Income 114575 7 Adjustments to reconcile Net Income 15685 8 Accounts Receivable 51625-67310 9 Inventory Increased 252800-277156 -24356 Prepaid Expenses decreased 2025-1300 10 725 11 Accounts Payable decreased -62034 54141-116175 12 Short term note payable increased 10300-6200 4100 13 Depreciation Expense 21750 Loss on sale of equipment 14 6125 -69375 15 Net Cash provided by Operating Activities 45200 16 I. Cash Flow from Investing Activities 12625 17 Sale of Equipment 18 Equipment purchased 32000 19 Net Cash used for Investing Activities -19375 20 I. Cash Flow from Financing Activities 21 Long Term Notes Payable repaid 50625 22 Shares Issue 13500 164750-151250 23 Paid in Capital in Excess of par 38500 24 Dividend Paid 50300 25 Net Cash used in Financing Activities -48925 26 Net Decrease in Cash 23100 74500 27 Add: Opening Cash Balance 28 Cash Balance on Dec 31, 2017 51400