Forten Company, a merchandiser, recently completed its calendar-year 2017 operat

Question

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 Comparative Balance Sheets December 31, 2017 and 2016 2017 2016 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets $ 79,900 95,970 305,656 1.410 482,936 137,500 (46,625 93,500 70,625 271,800 2,295 438,220 128,000 (56,000) $573,811 $510,220 Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term notes payable Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings $ 73,141 $144,675 10,000 154,675 55,00068,750 223,425 16,000 89,141 144,141 202,750 57,500 169,420 170,250 116,545 $573,811 $510,220 Total liabilities and equity

Explanation / Answer

FORTEN COMPANY Cash Flow Statement   For the year ended December 31, 2017 Cash flows from operating activities Net Income $ 106,975 Adjustment to reconcile net income to: Depreciation expense $   40,750 Loss on sale of equipment $   25,125 Increase in accounts receivable $ (25,345) Increase in inventory $ (33,856) Decreased in prepaid expense $         885 Decrease in accounts payable $ (71,534) $ (63,975) Net cash provided by operating activities $    43,000 Cash flows from investing activities Proceeds from sale of equipment $   31,625 Purchase of equipment $ (70,000) Net cash used by investing activities $ (38,375) Cash flows from financing activities Proceeds from issue of stock $   90,000 Borrowing of short term notes $      6,000 Repayment of long term notes $ (60,125) Dividend paid $ (54,100) Net cash used by financing activities $ (18,225) Net increase in cash and cash equivalents $ (13,600) Cash and cash equivalents at beginning of period $    93,500 Cash and cash equivalents at end of period $    79,900 Non cash investing and financing activities Issued long term note for equipment $    46,375

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