Question

Forten Company, a merchandiser, recently completed its calendar-year 2018 operations. For the year, () 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 Prepald Expenses. The company's income statement, balance sheets, and additional information follow. FORTEN COMPANY Comparative Balance Sheets Decenber 31, 2018 and 2017 2018 2017 Assets Cash Accounts receivable Inventory Prepaid expenses Total eurrent ansets Equipment Accum. depreciation-Equipment Total assets Liabilities and Equity Accounts payable Short-term notes payable Total ourrent 11abilitien Long-term notes payable Total 1iabilities Eqaity Common stock,$5 par value Paid-in capital in excess of par, common stock Retained earnings $ 54,400 76,500 3, 625 280,156 254, 800 2,005 386,930 111,000 (38-125) 47,500 $522,521 $450,430 0,310 1,280 406,146 154,500 56,141 $119,175 6,600 67,041 125, 775 30,541 177,525 168,750154,750 42,000 101 230110 195 Total liabilities and equity 522,521 $450,430

Answer 1

Statement of Cash Flows
For year ended December 31 2018 (indirect method)
	$	$
Cash flows from operating activities
Net income	113775
Adjustments to reconcile net income to net cash provided by operations
Loss on disposal of equipment	8125
Depreciation expense	23750
Increase in Accounts receivable (70310-53625)	-16685
Increase in inventory (280156-254800)	-25356
Decrease in prepaid expense (1280-2005)	725
Decrease in Account payable (56141-119175)	-63034
Net cash provided by operating activities		41300
Cash flows from investing activities
Cash Paid for equipment	-36000
cash received from sale of equipment	14625
Net cash used in investing activities		-21375
Cash flows from financing activities
Cash borrowed on short term note (10900-6600)	4300
cash paid on long term note (63500-51750)	-51625
cash received from issuance of commonstock (2800*$20)	56000
cash paid for dividends	-50700	-42025
Net increase (decrease) of cash		-22100
Cash Balance at the beginning of the year		76500
Cash Balance at the end of the year		54400
Statement of Cash Flows
For year ended December 31 2018 (Direct method)
	$	$
Cash receipts from customers	580815
cash paid for merhcandise	-376390
cash paid for operating expense (135400-725)	-134675
Cash paid for income taxes	-28450
cash flows from operating activities		41300
Cash flows from investing activities
Cash Paid for equipment	-36000
cash received from sale of equipment	14625
Net cash used in investing activities		-21375
Cash flows from financing activities
Cash borrowed on short term note (10900-6600)	4300
cash paid on long term note (63500-51750)	-51625
cash received from issuance of common stock (2800*$20)	56000
cash paid for dividends	-50700	-42025
Net increase (decrease) of cash		-22100
Cash Balance at the beginning of the year		76500
Cash Balance at the end of the year		54400

Cash collections from customers	sales - Increase in accounts receivable
	597500-16685
	580815
Cash Payments	Cost of goods sold + Increase in inventory+Decrease in Accounts Payable
	288000+25356+63034
	376390