Reference no: EM13789469
Forten Company, a merchandiser, recently completed its calendar-year 2013 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 balance sheets and income statement follow.
FORTEN COMPANY
Comparative Balance Sheets
December 31, 2013 and 2012
2013 2012
Assets
Cash $ 68,039 $ 71,500
Accounts receivable 78,425 60,625
Merchandise inventory 260,656 231,800
Prepaid expenses 1,580 2,075
Equipment 161,475 119,000
Accum. Depreciation Equipment (52,750) (59,000)
Total assets $ 517,425 $ 426,000
Liabilities and Equity
Accounts payable $ 58,175 $ 111,050
Short-term notes payable 9,800 5,900
Long-term notes payable 24,725 42,500
Common stock, $5 par value 166,750 149,750
Paid-in capital in excess of par, common stock 51,000 0
Retained earnings 206,975 116,800
Total liabilities and equity $ 517,425 $ 426,000
FORTEN COMPANY
Income Statement
For Year Ended December 31, 2013
Sales $ 632,500
Cost of goods sold 305,000
Gross profit 327,500
Operating expenses
Depreciation expense $ 19,900
Other expenses 129,600 149,500
Other gains (losses)
Loss on sale of equipment (4,475)
Income before taxes 173,525
Income taxes expense 30,750
Net income $ 142,775
Additional Information on Year 2013 Transactions
a. The loss on the cash sale of equipment was $4,475 (details in b).
b. Sold equipment costing $45,675, with accumulated depreciation of $26,150, for $15,050 cash.
c. Purchased equipment costing $88,150 by paying $62,000 cash and signing a long-term note payable for the balance.
d. Borrowed $3,900 cash by signing a short-term note payable.
e. Paid $43,925 cash to reduce the long-term notes payable.
f. Issued 3,400 shares of common stock for $20 cash per share.
g. Declared and paid cash dividends of $52,600.
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.)