Forten Company a merchandiser recently completed its calenda

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

The loss on the cash sale of equipment was $4,500 (details in b).

Sold equipment costing $45,800, with accumulated depreciation of $26,200, for $15,100 cash.

Purchased equipment costing $88,300 by paying $63,000 cash and signing a long-term note payable for the balance.

Borrowed $4,000 cash by signing a short-term note payable.

Paid $44,125 cash to reduce the long-term notes payable.

Issued 3,500 shares of common stock for $20 cash per share.

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.)

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.

Solution

Cash flow Statement: Cash flowws from operating activities: Net income for the year 145200 Adjustment requirred for reconciliation: Depreciation expense 20000 Loss on sale of equipment 4500 Increase in Acounts receivabble -18000 Increase in Inventory -29106 Decrease in Prepaid expense 500 Decrease in Accounts payable -53125 Net cash provided from Operating activities 69,969 Cash flows from Investing activiities: Sale of equipment 15100 Purchase of equipment -63000 Net cash used for investting activities -47,900.00 Cash flows from Financing activities: Borrowing from short term notes 4000 Repayment of long term notes -44125 Issue of shares 70000 Dividend paid -53000 Net cash used in Financing activities -23125 Net increase in cash -1056 Beginning balance of cash 72000 Ending balance of cash 70944