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Forten Company, a merchandiser, recently completed its calendar-year 2015 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.

2015

2014

Sold equipment costing $46,500, with accumulated depreciation of $29,375, for $11,750 cash. This yielded a loss of $5,375.

Purchased equipment costing $97,000 by paying $30,000 cash and (i.) by signing a long-term note payable for the balance.

Prepare a complete statement of cash flows using a spreadsheet; report its operating activities using the indirect method. (Enter all amounts as positive values.)

Explanation / Answer

Cash Flow Statement for the year ending 31 Dec 2015 A) Cash Flows from Operating Activities Amount Net Income After Tax 119425 Add: Income Tax Expense 23000 Net Profit Before Tax & Extra Ordinary Item 142425 Adjustments for: Depreciation 20000 Loss on Sale of Equipment 5375 Operating Profit before working capital changes 167800 Adjustments for Current Assets & Current Liabilties Less: Decrease in Accounts Payable: (112000-51930) -60070 Add: Increase in Short Term Loan: (10000-8000) 2000 Add: Decrease in Prepaid Expense: (1800-1000) 800 Less: Increase in Inventory: (276500-252500) -24000 Less: Increase in Accounts Receivable: (65880-50000) -15880 Cash Genearted from Operations 70650 Taxes Paid: (0+20000-0) -23000 Cash before Extra Ordinary Items 47650 Extra-ordinary items 0 Net Cash from (Used in) Operations 47650 B) Cash Flows from Investing Activities 0 Purchase of Equipment -97000 Sale of Equipment 11750 Net Cash from Investing Activities -85250 C) Cash Flows from Financing Activities Declare and Paid Cash Dividend -55700 Issuance of Common Stock: (2500*20) 50000 Notes Payable -48000 Notes Payable Issued: (67500+48000-48500) 67000 Net Cash from Financing Activities 13300 Increase or Decrease in Cash(A+B+C) -24300 Cash & Equivalent in the beginning 73500 Cash & Equivalent at the end 49200

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