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 companyâs income statement and balance sheets follow.
FORTEN COMPANY
Comparative Balance Sheets
December 31, 2017 and 2016
2017 2016
Assets
Cash $63,400 $82,500
Accounts receivable 79,360 59,625
Inventory 289,156 260,800
Prepaid expenses 1,300 2,075
Total current assets 433,216 405,000
Equipment 148,500 117,000
Accum. depreciationâEquipment (41,125) (50,500)
Total assets $ 540,591 $471,500
Liabilities and Equity
Accounts payable $62,141 $128,175
Short-term notes payable 12,700 7,800
Total current liabilities 74,841 135,975
Long-term notes payable 60,500 57,750
Total liabilities 135,341 193,725
Equity
Common stock, $5 par value 180,750 159,250
Paid-in capital in excess of par, 46,500 0
common stock
Retained earnings 178,000 118,525
Total liabilities and equity $ 540,591 $471,500
FORTEN COMPANY
Income Statement
For Year Ended December 31, 2017
Sales $ 627,500
Cost of goods sold 294,000
Gross profit 333,500
Operating expenses
Depreciation expense $29,750
Other expenses 141,400 171,150
Other gains (losses)
Loss on sale of equipment (14,125)
Income before taxes 148,225
Income taxes expense 36,850
Net income $111,375
Additional Information on Year 2017 Transactions
The loss on the cash sale of equipment was $14,125 (details in b).
Sold equipment costing $73,875, with accumulated depreciation of $39,125, for $20,625 cash.
Purchased equipment costing $105,375 by paying $48,000 cash and signing a long-term note payable for the balance.
Borrowed $4,900 cash by signing a short-term note payable.
Paid $54,625 cash to reduce the long-term notes payable.
Issued 3,400 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $51,900.
Required:
1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)