Reference no: EM131774779
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.
FORTEN COMPANY
Comparative Balance Sheets
December 31, 2015 and 2014 |
| |
2015
|
|
2014
|
| Assets |
|
|
|
|
|
| Cash |
$ |
66,814 |
|
$ |
69,000 |
| Accounts receivable |
|
74,925 |
|
|
58,125 |
| Inventory |
|
264,406 |
|
|
236,800 |
| Prepaid expenses |
|
1,480 |
|
|
1,950 |
| |
|
| Total current assets |
|
407,625 |
|
|
365,875 |
| Equipment |
|
156,350 |
|
|
114,000 |
| Accum. depreciation-Equipment |
|
(47,500) |
|
|
(54,000) |
| |
|
| Total assets |
$ |
516,475 |
|
$ |
425,875 |
| |
|
| Liabilities and Equity |
|
|
|
|
|
| Accounts payable |
$ |
58,675 |
|
$ |
110,300 |
| Short-term notes payable |
|
8,800 |
|
|
5,400 |
| |
|
| Total current liabilities |
|
67,475 |
|
|
115,700 |
| Long-term notes payable |
|
32,475 |
|
|
40,000 |
| |
|
| Total liabilities |
|
99,950 |
|
|
155,700 |
| Equity |
|
|
|
|
|
| Common stock, $5 par value |
|
163,000 |
|
|
148,500 |
| Paid-in capital in excess of par, common stock |
|
43,500 |
|
|
0 |
| Retained earnings |
|
210,025 |
|
|
121,675 |
| |
|
| Total liabilities and equity |
$ |
516,475 |
|
$ |
425,875 |
FORTEN COMPANY
Income Statement
For Year Ended December 31, 2015 |
| Sales |
|
|
|
$ |
620,000 |
| Cost of goods sold |
|
|
|
|
300,000 |
| |
|
|
|
| Gross profit |
|
|
|
|
320,000 |
| Operating expenses |
|
|
|
|
|
| Depreciation expense |
$ |
19,400 |
|
|
|
| Other expenses |
|
127,800 |
|
|
147,200 |
| |
|
|
|
| Other gains (losses) |
|
|
|
|
|
| Loss on sale of equipment |
|
|
|
|
(4,350) |
| |
|
|
|
| Income before taxes |
|
|
|
|
168,450 |
| Income taxes expense |
|
|
|
|
29,500 |
| |
|
|
|
| Net income |
|
|
|
$ |
138,950 |
Additional Information on Year 2015 Transactions
a. The loss on the cash sale of equipment was $4,350 (details in b).
b. Sold equipment costing $45,050, with accumulated depreciation of $25,900, for $14,800 cash.
c. Purchased equipment costing $87,400 by paying $52,000 cash and signing a long-term note payable for the balance.
d. Borrowed $3,400 cash by signing a short-term note payable.
e. Paid $42,925 cash to reduce the long-term notes payable.
f. Issued 2,900 shares of common stock for $20 cash per share.
g. Declared and paid cash dividends of $50,600.
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