What about the direct method for this problem? chapter 23 problem 1PSA Required
ID: 2430165 • Letter: W
Question
What about the direct method for this problem? chapter 23 problem 1PSA
Required information
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 $5,125 (details in b).
Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash.
Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term note payable for the balance.
Borrowed $4,000 cash by signing a short-term note payable.
Paid $50,125 cash to reduce the long-term notes payable.
Issued 2,500 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $50,100.
Required:
Prepare a complete statement of cash flows; report its operating activities according to the direct method. (Amounts to be deducted should be indicated with a minus sign.)
Comparative Balance Sheets
December 31, 2017 and 2016 2017 2016 Assets Cash $ 49,800 $ 73,500 Accounts receivable 65,810 50,625 Inventory 275,656 251,800 Prepaid expenses 1,250 1,875 Total current assets 392,516 377,800 Equipment 157,500 108,000 Accum. depreciation—Equipment (36,625 ) (46,000 ) Total assets $ 513,391 $ 439,800 Liabilities and Equity Accounts payable $ 53,141 $ 114,675 Short-term notes payable 10,000 6,000 Total current liabilities 63,141 120,675 Long-term notes payable 65,000 48,750 Total liabilities 128,141 169,425 Equity Common stock, $5 par value 162,750 150,250 Paid-in capital in excess of par, common stock 37,500 0 Retained earnings 185,000 120,125 Total liabilities and equity $ 513,391 $ 439,800
Explanation / Answer
FORTEN COMPANY
Cash flow Statement for the year ended 31st December 2017
Cash flows from Operating Activities
Cash receipts from Customers
$ 567,315.00
Cash payments:
Cash paid to accounts payables/suppliers
$ (370,390.00)
For operating expenses
$ (131,775.00)
For Income tax
$ (24,250.00)
$ (526,415.00)
A.Net Cash provided by operating activities
$ 40,900.00
Cash flows from Investing activities
Sale of Equipment
$ 11,625.00
Purchase of Equipment
$ (30,000.00)
B.Net cash used by investing activities
$ (18,375.00)
Cash flows from Financing activities
Proceeds from issue of Shares
$ 50,000.00
Payment od Dividend
$ (50,100.00)
Payment for notes payable-long term
$ (50,125.00)
Proceeds from Notes Payable issue
$ 4,000.00
C. Net cash Used in financing activities
$ (46,225.00)
(A+B+C) Net increase (Decrease) in cash
$ (23,700.00)
Add: Beginning cash Balance
$ 73,500.00
Ending Cash Balance
$ 49,800.00
Actual payment made for equipment purchase will be shown in Investing activities that is $30000.
Working 1) Cash paid to Suppliers
Cost of goods sold
$ 285,000.00
Add -Increase in Inventory
$ 23,856.00
Purchases
$ 308,856.00
Add - Decrease in accounts Payable
$ 61,534.00
Amount paid to supplier
$ 370,390.00
Working 2) Cash paid for Operating Activities
Total Operating Expenses
$ 132,400.00
Less -Decrease in Prepaid Expenses
$ 625.00
Cash paid for Operating Activities
$ 131,775.00
Working 3) Cash Received from Customers
Sales Revenue
$ 582,500.00
Less: Increase in Accounts Receivable
$ 15,185.00
Cash Received from Customers
$ 567,315.00
FORTEN COMPANY
Cash flow Statement for the year ended 31st December 2017
Cash flows from Operating Activities
Cash receipts from Customers
$ 567,315.00
Cash payments:
Cash paid to accounts payables/suppliers
$ (370,390.00)
For operating expenses
$ (131,775.00)
For Income tax
$ (24,250.00)
$ (526,415.00)
A.Net Cash provided by operating activities
$ 40,900.00
Cash flows from Investing activities
Sale of Equipment
$ 11,625.00
Purchase of Equipment
$ (30,000.00)
B.Net cash used by investing activities
$ (18,375.00)
Cash flows from Financing activities
Proceeds from issue of Shares
$ 50,000.00
Payment od Dividend
$ (50,100.00)
Payment for notes payable-long term
$ (50,125.00)
Proceeds from Notes Payable issue
$ 4,000.00
C. Net cash Used in financing activities
$ (46,225.00)
(A+B+C) Net increase (Decrease) in cash
$ (23,700.00)
Add: Beginning cash Balance
$ 73,500.00
Ending Cash Balance
$ 49,800.00
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.