Question

Use the following information for the Problems below. Forten Company, a merchandiser, recently completed its calendar-year 2017 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, 2017 and 2016 2017 2016 $ 61,900 $ 81,500 77,850 58,625 287,656 259,800 1,290 2,055 428,696 401,980 149,500 116,000 (40,625) (50,000) $ 537,571 $ 467,980 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term notes payable Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings Total liabilities and equity $ 7,600 61,141 $ 126,675 12,400 73,541 134, 275 61,000 56, 750 134,541 191,025 178,750 158, 250 45,500 178,780 118,705 $ 537,571 $ 467,980

Answer 1

FORTEN COMPANY Cash Flow Statement for the Year Ending 31st Dec, 2017 Indirect Method 5 Particulars 5 A. Cash Flows From Operating Activities - Net Income after tax 3 Add: Income Tax Expense Net Income before tax (Amount in $) 111,775 35,450 147,225 28,750 13,125 189,100 1 Adjustments to Reconcile Net Income:- 2 Add:Depreciation Expense 3 Add: Loss on sale of Equipment (W Note 1) 4 Operating Profit before working capital changes 5 Changes in Working Capital :- 6 Increase in Inventory 7 Increase in Account Receivable 8 Decrease in Prepaid expenses 9 Decrease in Account Payable 0 Total (27,856) (19,225) 765 (65,534) 77,250 2 Less : Income tax Paid 3 Net Cash Flow From Operating Activities (A) (35,450) 41,800

1 B. Cash Flows From Investing Activities 2 Cash received on Sale of Equipment (W Note 1) 3 Purchase of Equipment (W Note 2) 4 Net Cash Flow From Investing Activities (B) 19,625 (46,000) (26,375) 6 C. Cash Flows From Financing Activities 7 Cash Received from issue of Common stock (3300 Shares * $ 20) 3 Dividend Paid 9 Cash paid on Long term note payable Cash Borrowed on short term note payable 1 Net Cash Flow From Financing Activities (C) 66,000 (51,700) (54,125) 4,800 (35,025) 3 Net Increase (Decrease) in cash (A+B+C) 4 Cash Balance December 31, 2016 5 Cash Balance December 31, 2017 (19,600) 81,500 61,900

48 Working Note 1 49 Calculation of Loss on sale of Equipment 50 Cost of Equipment Sold 51 Less : Accumulated Depreciation 52 Total 53 Less : Cash received on sale of equipment 54 Loss on the sale of Equipment 70,875 (38,125) 32,750 (19,625) 13,125 55 56 Working Note 2 57 Cost of Equipment Purchased 58 Less : Cash Paid (Investing Activity) 59 Long Term Note Payable (Non Cash Activity) 104,375 (46,000) 58,375