Problem 16-1A Indirect: Statement of cash flows - FORTEN COMPANY
AsmaProblem 16-1A Indirect: Statement of cash flows LO A1, P1, P2, P3
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 | $ | 63,909 | $ | 68,500 | |
| Accounts receivable | 74,225 | 57,625 | |||
| Merchandise inventory | 265,156 | 237,800 | |||
| Prepaid expenses | 1,460 | 1,925 | |||
| Equipment | 155,325 | 113,000 | |||
| Accum. depreciation—Equipment | (46,450) | (53,000) | |||
| Total assets | $ | 513,625 | $ | 425,850 | |
| Liabilities and Equity | |||||
| Accounts payable | $ | 58,775 | $ | 110,150 | |
| Short-term notes payable | 8,600 | 5,300 | |||
| Long-term notes payable | 33,025 | 39,500 | |||
| Common stock, $5 par value | 162,250 | 148,250 | |||
| Paid-in capital in excess of par, common stock | 42,000 | 0 | |||
| Retained earnings | 208,975 | 122,650 | |||
| Total liabilities and equity | $ | 513,625 | $ | 425,850 | |
| FORTEN COMPANY Income Statement For Year Ended December 31, 2013 | |||||
| Sales | $ | 617,500 | |||
| Cost of goods sold | 299,000 | ||||
| Gross profit | 318,500 | ||||
| Operating expenses | |||||
| Depreciation expense | $ | 19,300 | |||
| Other expenses | 129,100 | 148,400 | |||
| Other gains (losses) | |||||
| Loss on sale of equipment | (4,325) | ||||
| Income before taxes | 165,775 | ||||
| Income taxes expense | 29,250 | ||||
| Net income | $ | 136,525 | |||
| Additional Information on Year 2013 Transactions | |
| a. | The loss on the cash sale of equipment was $4,325 (details in b). |
| b. | Sold equipment costing $44,925, with accumulated depreciation of $25,850, for $14,750 cash. |
| c. | Purchased equipment costing $87,250 by paying $51,000 cash and signing a long-term note payable for the balance. |
| d. | Borrowed $3,300 cash by signing a short-term note payable. |
| e. | Paid $42,725 cash to reduce the long-term notes payable. |
| f. | Issued 2,800 shares of common stock for $20 cash per share. |
| g. | Declared and paid cash dividends of $50,200. |
| 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.) |
12 years ago
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