Forten Company, a merchandiser, recenitly completed ts calendar-year 2015 operat

Question

Forten Company, a merchandiser, recenitly completed ts calendar-year 2015 operations. For the year,(1) all sales are credit sales, (2) all credits to Accounts Receivable roflect cash receipts from customers, (3) al purchases of ieventory are on cred, (4) all debits to Accounts Payable reflect cash payments for inventory and (5) Other Expenses are paid in advance and are initially deobited to Prepaid Expenses. The company's income statement and balance sheets follow FORTEN COMPANY Comparaive Balance Sheets December 31, 2015 and 2014 2015 2014 Assets Cash Accounts receivable 68,474 70,000 59,125 262,906 234,800 2,000 76,325 Prepaid expenses Total current assets Accum. depreciation-Equipment Total assets 1,520 409.225 365,925 158,400 116.000 49,600) (6,000) $ 518,025 $425,925 Liabilities and Equity Accounts payable Short-borm notos payable 58,475 $ 110.600 9,200 5,600 Total current liabilitios Long-lerm notes payable 67 675 116,200 Total liablities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retaned eamings 31.375 41,000 99.050 157,200 64,500 149,000 207,975 119,725 518.025 $425,925 46,500 Total liabilties and equity FORTEN COMPANY Income Statement For Year Ended December 31, 2015 Sales Cost of goods sold $ 625,000 302,000 323,000 Gross profit Operating expenses S 19,600 Depreciation expense Other expenses 29,350 148,950 Other gains (losses) Loss on sale of equipment (4.400) Income before taxes Income taxes expense 169.650 0,000 Net income $ 139.650 Additional Information on Year 2015 Transactions a. The loss on the cash sale of equipment was $4,400 (detals in b) b. Sold equipment costing $45,300, with accumulated depreciation of $26,000, for $14,900 cash. c. Purchased equipment costing $87,700 by paying $54,000 cash and signing a long-term note payable for the balance d. Borrowed $3,600 cash by signing a short-term note payable. e. Paid $43,325 cash to reduce the long-term notes payable. f Issued 3,100 shares of common stock for $20 cash per share.

Explanation / Answer

FORTEN COMPANY

Statement of cash flows for the year ended December 31,2015

Particulars Amount($) Cash flows from operating activities Netincome $139650 Depreciation $19600 Loss on sale of equipment $4400 Adjustments: Increase in accounts receivable ($17200) Increase in inventory ($28106) Decrease in prepaid expenses $480 Decrease in accounts payable ($52125) Increase in notes payable $3600 Net Cash flows provided by operating activities $70299 Cash flows from investing activities Sale of equipment $14900 Purchase of equipment ($54000) Net cash flows provided by investing activities $31199 Cash flows from financing activities Issue of common stock $62000 Redemption of Long term notes payable ($43325) Paid cash dividends ($51400) Net cash flows used by financing activities ($1526) Beginning cash balance $70000 Ending cash balance $68474.

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