Use the following information for the Problems below. Forten Company, a merchand

Question

Use the following information for the Problems 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 $12,125 (details in b).

Sold equipment costing $67,875, with accumulated depreciation of $37,125, for $18,625 cash.

Purchased equipment costing $103,375 by paying $44,000 cash and signing a long-term note payable for the balance.

Borrowed $4,700 cash by signing a short-term note payable.

Paid $53,625 cash to reduce the long-term notes payable.

Issued 3,200 shares of common stock for $20 cash per share.

Declared and paid cash dividends of $51,500.

Problem 16-5AB Direct: Statement of cash flows LO P1, P3, P5

Required:
Prepare a complete statement of cash flows; report its operating activities according to the direct method.

FORTEN COMPANY
Comparative Balance Sheets
December 31, 2017 and 2016 2017 2016 Assets Cash $ 60,400 $ 80,500 Accounts receivable 76,340 57,625 Inventory 286,156 258,800 Prepaid expenses 1,280 2,035 Total current assets 424,176 398,960 Equipment 150,500 115,000 Accum. depreciation—Equipment (40,125 ) (49,500 ) Total assets $ 534,551 $ 464,460 Liabilities and Equity Accounts payable $ 60,141 $ 125,175 Short-term notes payable 12,100 7,400 Total current liabilities 72,241 132,575 Long-term notes payable 61,500 55,750 Total liabilities 133,741 188,325 Equity Common stock, $5 par value 176,750 157,250 Paid-in capital in excess of par, common stock 44,500 0 Retained earnings 179,560 118,885 Total liabilities and equity $ 534,551 $ 464,460

Explanation / Answer

Cash flow Statement: Cash flows from Operating activities: Cash received from Accounts receivable (617500+57625-76340) 598785 Cash paid to suppliers (292000+286156-258800+125175-60141) -384390 cash paid for expense (139400+1280-2035) -138645 Income tax expense paid -34050 Nnet cash provided from Operatin activities 41700 Cash flows from Investing activities: Sale of Eqquipment 18625 Purchase of equipment -44000 Net cash used in Investing activities -25375 Cash flows from Financing activities: Borrowing from Short term notes payable 4700 Repayment of Long term notes payable -53625 Common Stock issued (3200 shares @20) 64000 Dividend paid -51500 Net cash used in financing activities -36425 Net decrease in cash -20100 Beginning Balance in cash 80500 Ending Balance in cash 60400

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