50.1K

Verified Solution

Link Copied!

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

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, and (4) all debits to Accounts Payable reflect cash payments for inventory.

FORTEN COMPANY
Income Statement
For Current Year Ended December 31
Sales		$ 597,500
Cost of goods sold		288,000
Gross profit		309,500
Operating expenses (excluding depreciation)	$ 135,400
Depreciation expense	23,750	159,150
Other gains (losses)
Loss on sale of equipment		(8,125)
Income before taxes		142,225
Income taxes expense		28,450
Net income		$ 113,775

FORTEN COMPANY
Comparative Balance Sheets
December 31
	Current Year	Prior Year
Assets
Cash	$ 54,400	$ 76,500
Accounts receivable	70,310	53,625
Inventory	280,156	254,800
Prepaid expenses	1,280	2,005
Total current assets	406,146	386,930
Equipment	154,500	111,000
Accumulated depreciationEquipment	(38,125)	(47,500)
Total assets	$ 522,521	$ 450,430
Liabilities and Equity
Accounts payable	$ 56,141	$ 119,175
Long-term notes payable	74,400	58,350
Total liabilities	130,541	177,525
Equity
Common stock, $5 par value	167,250	153,250
Paid-in capital in excess of par, common stock	42,000	0
Retained earnings	182,730	119,655
Total liabilities and equity	$ 522,521	$ 450,430

Additional Information on Current Year Transactions

The loss on the cash sale of equipment was $8,125 (details in b).

Sold equipment costing $55,875, with accumulated depreciation of $33,125, for $14,625 cash.

Purchased equipment costing $99,375 by paying $36,000 cash and signing a long-term notes payable for the balance.

Paid $47,325 cash to reduce the long-term notes payable.

Issued 2,800 shares of common stock for $20 cash per share.

Declared and paid cash dividends of $50,700.

Required:

1. Prepare a complete statement of cash flows using the indirect method for the current year.

Note: Amounts to be deducted should be indicated with a minus sign.

FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Adjustments to reconcile net income to net cash provided by operations: Income statement items not affecting cash Changes in current assets and current liabilities Cash flows from investing activities Cash flows from financing activities: Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year

Answer & Explanation Solved by verified expert

See Answer