Question

Required information [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 $ 64,900 se, 870 298,656 1.31e 437,736 147,5ee (41,625) $ 543,611 $ 83,5ee 60,625 261, see 2,095 488, eze 118, eee (51, eee) 5 475, eze Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment ACCUM. depreciation Equipment Total assets Liabilities and Equity ACCounts payable Short-term notes payable Total current liabilities Long-term notes payable Total liabilities Equity Common stock, 55 par value Paid in capital in excess of par, common stock Retained earnings Total liabilities and equity $ 63,141 13, eee 76,141 60, eee 136,141 $ 129,675 8,00 137,675 58,750 196,425 160, 250 182,75e 47,5ee 177,220 $ 543,611 118.245 $475.ee

Answer 1

Solution

Forten Company

1. Complete statement of cash flows, reporting its operating activities, using the indirect method:

Forten Company
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash Flows from Operating Activities:
Net Income		$110,975
Adjustments to reconcile net income to cash provided by operations:
Loss on sale of equipment	$15,125
Depreciation	$30,750
Increase in Accounts Receivable	($20,245)
Increase in Inventory	($28,856)
Decrease in prepaid expenses	$785
Decrease in accounts payable	($66,534)
Increase in short term notes payable	$5,000	($63,975)
Cash Flows from Operating Activities		$47,000
Cash Flows from Investing Activities:
Sale of Equipment	$21,625
Purchase of equipment	($50,000)
Cash flows from investing activities		($28,375)
Cash Flows from Financing Activities:
Payment for long-term note	($55,125)
Issuance of Shares	$70,000
Cash dividends	($52,100)
Cash flow from financing activities		($37,225)
Net decrease in cash		($18,600)
Beginning cash balance		$83,500
Ending cash balance		$64,900

Notes: the increase in long term notes payable to the extent of $56,375 is for the transaction involving equipment purchase. It’s a non-cash transaction and so does not form part of cash flow statement.

2. Complete Statement of Cash Flows using a spreadsheet, reporting its operating activities using the indirect method:

Statement of analysis –

Spreadsheet for Statement of Cash Flows
for the year ended Dec 31, 2017
		Analysis of Changes
	31-Dec-16	Debit	Credit	31-Dec-17
Balance Sheet Debit
Cash	$83,500			$64,900
Accounts Receivable	$60,625	$20,245		$80,870
Inventory	$261,800	$28,856		$290,656
Prepaid Expenses	$2,095		$785	$1,310
Equipment	$118,000	106,375	$76,875	$147,500
	$526,020			$585,236
Balance Sheet – Credits
Accumulated Depreciation - Equipment	$51,000	$40,125	$30,750	$41,625
Accounts Payable	$129,675	$66,534		$63,141
Short-term Notes Payable	$8,000		$5,000	$13,000
Long-term Notes Payable	$58,750	$55,125	$56,375	$60,000
Common Stock $5 par value	$160,250		$22,500	$182,750
Paid in Capital in Excess of Par	$0		$47,500	$47,500
Retained Earnings	$118,345	$52,100	$110,975	$177,220
	$526,020			$585,236