[The following information applies to the questions displayed below.] Forten Com
ID: 2437487 • 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 FORTEN COMPANY Compar ative Balance Sheets December 31, 2017 and 2016 2017 2016 Assets Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets $57, 400 78, 500 55, 625 256, 800 1, 995 392, 920 113, 000 (48, 500) $457, 420 73, 320 283, 156 1, 260 415, 136 152, 500 (39, 125) $528, 511 Liabilities and Equity Accounts payable Short-term notes payable Totalcurrentliabilities Long-term notes payable Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained eamings Total liabilities and equity $58, 141 11, 500 69, 641 62, 500 132, 141 $122, 175 7, 000 129, 175 53, 750 182, 925 172, 750 42, 500 181, 120 $528, 511 155, 250 119, 245 $457, 420 FORTEN COMP ANY Income Statement For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses $607, 500 290, 000 317, 500 $ 25, 750 137, 400 Depreciation expense 163, 150 Other expenses 0ther gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income (10, 125) 144, 225 31, 250 $112, 975Explanation / Answer
Answer:
FORTEN COMPANY
Statement of Cash Flows
For Year Ended December 31, 2017
Amount $
Amount $
Cash flows from operating activities
Net income ....
112975
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in accounts receivable (55625-73320)
-17695
Increase in inventory (256800-283156)
-26356
Decrease in prepaid expenses (1995-1260)
735
Decrease in accounts payable (58141-122175)
-64034
Depreciation expense
25750
Loss on disposal of equipment
10125
-71475
Net cash provided by operating activities
41500
Cash flows from investing activities
Cash received from sale of equipment
16625
Cash paid for equipment
-40,000
Net cash used in investing activities .
-23,375
Cash flows from financing activities
Cash borrowed on short-term note .
4500
Cash paid on long-term note ..
-52625
Cash received from issuing stock (3000x20)
60000
Cash paid for dividends
-51100
Net cash used in financing activities
-39225
Net decrease in cash .
-21,100
Cash balance at December 31, 2016
78500
Cash balance at December 31, 2017
57,400
Noncash investing and financing Activity
Purchased equipment for $101,375 by signing a $61,375 long-term note
FORTEN COMPANY
Statement of Cash Flows
For Year Ended December 31, 2017
Amount $
Amount $
Cash flows from operating activities
Net income ....
112975
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in accounts receivable (55625-73320)
-17695
Increase in inventory (256800-283156)
-26356
Decrease in prepaid expenses (1995-1260)
735
Decrease in accounts payable (58141-122175)
-64034
Depreciation expense
25750
Loss on disposal of equipment
10125
-71475
Net cash provided by operating activities
41500
Cash flows from investing activities
Cash received from sale of equipment
16625
Cash paid for equipment
-40,000
Net cash used in investing activities .
-23,375
Cash flows from financing activities
Cash borrowed on short-term note .
4500
Cash paid on long-term note ..
-52625
Cash received from issuing stock (3000x20)
60000
Cash paid for dividends
-51100
Net cash used in financing activities
-39225
Net decrease in cash .
-21,100
Cash balance at December 31, 2016
78500
Cash balance at December 31, 2017
57,400
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