Question

Forten Company's current year income statement, comparative balance sheets, and additional information follow. 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.
FORTEN COMPANY
Comparative Balance Sheets
December 31
Current Year Prior Year
Assets
Cash $ 66,400 $ 84,500
Accounts receivable 82,380 61,625
Inventory 292,156 262,800
Prepaid expenses 1,320 2,115
Total current assets 442,256 411,040
Equipment 146,500 119,000
Accum. depreciation—Equipment (42,125) (51,500)
Total assets $ 546,631 $ 478,540
Liabilities and Equity
Accounts payable $ 64,141 $ 131,175
Short-term notes payable 13,300 8,200
Total current liabilities 77,441 139,375
Long-term notes payable 59,500 59,750
Total liabilities 136,941 199,125
Equity
Common stock, $5 par value 179,250 161,250
Paid-in capital in excess of par, common stock 54,000 0
Retained earnings 176,440 118,165
Total liabilities and equity $ 546,631 $ 478,540
FORTEN COMPANY
Income Statement
For Current Year Ended December 31
Sales $ 637,500
Cost of goods sold 296,000
Gross profit 341,500
Operating expenses
Depreciation expense $ 31,750
Other expenses 143,400 175,150
Other gains (losses)
Loss on sale of equipment (16,125)
Income before taxes 150,225
Income taxes expense 39,650
Net income $ 110,575
Additional Information on Current Year Transactions
The loss on the cash sale of equipment was $16,125 (details in b).
Sold equipment costing $79,875, with accumulated depreciation of $41,125, for $22,625 cash.
Purchased equipment costing $107,375 by paying $52,000 cash and signing a long-term note payable for the balance.
Borrowed $5,100 cash by signing a short-term note payable.
Paid $55,625 cash to reduce the long-term notes payable.
Issued 3,600 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $52,300.
Required:
Prepare a complete statement of cash flows using a spreadsheet using the indirect method. (Enter all amounts as positive values.)

Answer 1

Answer:

Cash flow from all activities -$18,100

Cash at the beginning of the year $84,500

Cash at the end of year $66,400

Explanation:

Preparation of a complete statement of cash flows using a spreadsheet using the indirect method.

FORTEN COMPANY

Statement of Cash Flows

For the Year ended December 31

Cash Flow from Operating Activities:

Net Income $110,575

Adjustments to reconcile net income to cash flow from operating activities:

Depreciation $31,750

Loss on sale of Equipment $16,125

Increase in Accounts Receivables -$20,755

($61625 - $82380)

Increase in Inventory -$29,356

($262800-292156)

Decrease in Prepaid Expenses $795

($2115-1320)

Decrease In Accounts Payable -$67,034

($64141 - $131175)

Increase in Short term note payable $5,100

($13300-8200)

Total Adjustments -$63,375

Net Cash Flow From Operating Activities (A) $47,200

Cash Flow from Investing Activities:

Cash Received from sale of Equipment $22,625

Purchase of Equipment (In cash) -$52,000

Net Cash Flow From Investing Activities (B) -$29,375

($22,625-$52,000)

Cash Flow from Financing Activities:

Repayment of Long Term Note Payable -$55,625

Cash received from issue of common stock $72,000 (3600*$20)

Dividend paid -$52,300

Net Cash Flow From Financing Activities (C) -$35,925

Total Cash flow from all activities

(A+B+C) -$18,100

($47,200+-$29,375+-$35,925)

Cash at the beginning of the year $84,500

Cash at the end of year $66,400

($84,500-$18,100)

Therefore The complete statement of cash flows using a spreadsheet using the indirect method will be :

Cash flow from all activities -$18,100

Cash at the beginning of the year $84,500

Cash at the end of year $66,400