[The following information applies to the questions displayed below.] Forten Com
ID: 2333649 • Letter: #
Question
[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.
Additional Information on Year 2017 Transactions
The loss on the cash sale of equipment was $7,125 (details in b).
Sold equipment costing $52,875, with accumulated depreciation of $32,125, for $13,625 cash.
Purchased equipment costing $98,375 by paying $34,000 cash and signing a long-term note payable for the balance.
Borrowed $4,200 cash by signing a short-term note payable.
Paid $51,125 cash to reduce the long-term notes payable.
Issued 2,700 shares of common stock for $20 cash per share.
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.)
Comparative Balance Sheets
December 31, 2017 and 2016 2017 2016 Assets Cash $ 52,900 $ 75,500 Accounts receivable 68,810 52,625 Inventory 278,656 253,800 Prepaid expenses 1,270 1,995 Total current assets 401,636 383,920 Equipment 155,500 110,000 Accum. depreciation—Equipment (37,625 ) (47,000 ) Total assets $ 519,511 $ 446,920 Liabilities and Equity Accounts payable $ 55,141 $ 117,675 Short-term notes payable 10,600 6,400 Total current liabilities 65,741 124,075 Long-term notes payable 64,000 50,750 Total liabilities 129,741 174,825 Equity Common stock, $5 par value 166,750 152,250 Paid-in capital in excess of par, common stock 39,500 0 Retained earnings 183,520 119,845 Total liabilities and equity $ 519,511 $ 446,920
Explanation / Answer
Cash Flow statement for the year ended December 31,2017 Amount Amount cash flow from operating Activities Net Income as per income statement 114175 Add: Non cash and non operating items Depreciation 22750 Loss on sale of equipment 7125 29875 Add: Decrease in current assets and increase in current liabilities Prepaid Expenses 725 Short term notes 4200 4925 Less: increase in current assets and decrease in current liabilties Accounts receivable -16185 inventory -24856 accounts payable -62534 -103575 Net cash flow from operating activities 45400 Cash Flows from Investing Activities Sale proceeds of equipment 13625 Purchase of equipment -34000 Net cash used by investing activities -20375 Cash Flows from Financing Activities Payment of long-term notes payable -51125 Issuance of Common stock (2700*20) 54000 Payment of cash dividends -50500 Net cash used by financing activities -47625 Net increase (decrease) in cash -22600 Cash balance at beginning of year 75500 Cash balance at end of year 52900
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