Inces Inces FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense Other expenses Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net Income Required: 1. Prepare a complete statement of cash flows using indicated with a minus sign.) Cash flows from operating activities Additional Information on Current Year Transactions o. The loss on the cash sale of equipment was $15,125 (details in b). b. Sold equipment costing $76,875, with accumulated depreciation of $40,125, for $21,625 cash. c. Purchased equipment costing $106,375 by paying $50,000 cash and signing a long-term note payable for the balance. d. Borrowed $5,000 cash by signing a short-term note payable. Show Transcribed Text $ 30,750 142,400 e. Paid $55,125 cash to reduce the long-term notes payable. f. Issued 3,500 shares of common stock for $20 cash per share. 9. Declared and paid cash dividends of $52,100, FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities $632,500 295,000 337,500 Cash flows from investing activities 173,150 Cash flows from financing activities (15,125) 149,225 38.250 $ 110,975 Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, cursot year indirect method for the current year (Amounts to be deducted should be 3 Required: 1. Prepare a complete statement of cash flows using the Indirect method for the current year. (Amounts to be deducted should be Indicated with a minus sign.) FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Adjustments to reconcile net income to net cash provided by operations: Ć S 1
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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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.
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
FORTEN COMPANY
Comparative Balance Sheets
December 31
Equity
Common stock, $5 par value
Paid-in capital in excess of par, common stock
Retained earnings
Total liabilities and equity
Current Year
$ 64,900
80,870
290,656
1,310
437,736
147,500.
(41,625)
$ 543,611
$ 63,141
13,000
76,141
60,000
136,141
177,750
52,500
177,220
$ 543,611
Prior Year
$83,500
60,625
261,800
2,095
408,020
118,000.
(51,000)
$475,020
$ 129,675
8,000
137,675
58,750
196,425
160,250
0
118,345
$475,020](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa284b2d6-792a-4ac6-a1f2-a02cc7fa0613%2F0d0673d0-dae8-4885-a4f3-466a3433f13b%2Fl1k229e_processed.jpeg&w=3840&q=75)
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