Forten Company, a merchandiser, recently completed its calendar-year 2017 operations. For the year, (1) all sales...

   

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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. 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 FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 Total current liabilities Long-term notes payable Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings Total liabilities and equity $ 52,900 68,810 278,656 1,270 401,636 155,500 (37,625) 519,511 $ 2017 $ 55,141 10,600 65,741 64,000 129,741 $ 2016 75,500 52,625 253,800 1,995 383,920 110,000 (47,000) $ 446,920 $ 117,675 6,400 124,075 50,750 174,825 166,750 152,250 39,500 0 183,520 119,845 $ 519,511 $ 446,920 Sales Cost of goods sold Gross profit Operating expenses FORTEN COMPANY Income Statement For Year Ended December 31, 2017 Depreciation expense Other expenses Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income $ 22,750 134,400 $592,500 287,000 305,500 $ 157,150 (7,125) 141,225 27,050 114,175 Additional Information on Year 2017 Transactions a. The loss on the cash sale of equipment was $7,125 (details in b). b. Sold equipment costing $52,875, with accumulated depreciation of $32,125, for $13,625 cash. I signing a long-term note payable for the c. Purch equipment costing $98,375 by paying $34,000 cash balance. d. Borrowed $4,200 cash by signing a short-term note payable. e. Paid $51,125 cash to reduce the long-term notes payable. f. Issued 2,700 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $50,500. Required: 1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operations: Loss on disposal of equipment Depreciation expense Accounts receivable increase Inventory increase Prepaid expense decrease Cash borrowed on short-term note Accounts payable decrease Cash flows from investing activities Cash paid for equipment Cash received from sale of equipment Cash flows from financing activities: Net increase (decrease) in cash Cash balance at beginning of year Cash balance at end of year $ 114,175 7,125 22,750 (16,185) (24,856) 725 4,200 (62,534) (34,000) 13,625 $ $ $ 45,400 (20,375) 0 25,025 25,025 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. 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 FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 Total current liabilities Long-term notes payable Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings Total liabilities and equity $ 52,900 68,810 278,656 1,270 401,636 155,500 (37,625) 519,511 $ 2017 $ 55,141 10,600 65,741 64,000 129,741 $ 2016 75,500 52,625 253,800 1,995 383,920 110,000 (47,000) $ 446,920 $ 117,675 6,400 124,075 50,750 174,825 166,750 152,250 39,500 0 183,520 119,845 $ 519,511 $ 446,920 Sales Cost of goods sold Gross profit Operating expenses FORTEN COMPANY Income Statement For Year Ended December 31, 2017 Depreciation expense Other expenses Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income $ 22,750 134,400 $592,500 287,000 305,500 $ 157,150 (7,125) 141,225 27,050 114,175 Additional Information on Year 2017 Transactions a. The loss on the cash sale of equipment was $7,125 (details in b). b. Sold equipment costing $52,875, with accumulated depreciation of $32,125, for $13,625 cash. I signing a long-term note payable for the c. Purch equipment costing $98,375 by paying $34,000 cash balance. d. Borrowed $4,200 cash by signing a short-term note payable. e. Paid $51,125 cash to reduce the long-term notes payable. f. Issued 2,700 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $50,500. Required: 1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operations: Loss on disposal of equipment Depreciation expense Accounts receivable increase Inventory increase Prepaid expense decrease Cash borrowed on short-term note Accounts payable decrease Cash flows from investing activities Cash paid for equipment Cash received from sale of equipment Cash flows from financing activities: Net increase (decrease) in cash Cash balance at beginning of year Cash balance at end of year $ 114,175 7,125 22,750 (16,185) (24,856) 725 4,200 (62,534) (34,000) 13,625 $ $ $ 45,400 (20,375) 0 25,025 25,025

Answer rating: 100% (QA)

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