Use the following information for the Problems below. Skip to question [The following information applies to the questions displayed below.] 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 $ 58,900 $ 79,500 Accounts receivable 74,830 56,625 Inventory 284,656 257,800 Prepaid expenses 1,270 2,015 Total current assets 419,656 395,940 Equipment 151,500 114,000 Accum. depreciation—Equipment (39,625 ) (49,000 ) Total assets $ 531,531 $ 460,940 Liabilities and Equity Accounts payable $ 59,141 $ 123,675 Short-term notes payable 11,800 7,200 Total current liabilities 70,941 130,875 Long-term notes payable 62,000 54,750 Total liabilities 132,941 185,625 Equity Common stock, $5 par value 171,750 156,250 Paid-in capital in excess of par, common stock 46,500 0 Retained earnings 180,340 119,065 Total liabilities and equity $ 531,531 $ 460,940 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales $ 612,500 Cost of goods sold 291,000 Gross profit 321,500 Operating expenses Depreciation expense $ 26,750 Other expenses 138,400 165,150 Other gains (losses) Loss on sale of equipment (11,125 ) Income before taxes 145,225 Income taxes expense 32,650 Net income $ 112,575 Additional Information on Current Year Transactions The loss on the cash sale of equipment was $11,125 (details in b). Sold equipment costing $64,875, with accumulated depreciation of $36,125, for $17,625 cash. Purchased equipment costing $102,375 by paying $42,000 cash and signing a long-term note payable for the balance. Borrowed $4,600 cash by signing a short-term note payable. Paid $53,125 cash to reduce the long-term notes payable. Issued 3,100 shares of common stock for $20 cash per share. Declared and paid cash dividends of $51,300.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Use the following information for the Problems below.

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[The following information applies to the questions displayed below.]

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   $ 58,900         $ 79,500    
Accounts receivable     74,830           56,625    
Inventory     284,656           257,800    
Prepaid expenses     1,270           2,015    
Total current assets     419,656           395,940    
Equipment     151,500           114,000    
Accum. depreciation—Equipment     (39,625 )         (49,000 )  
Total assets   $ 531,531         $ 460,940    
Liabilities and Equity                      
Accounts payable   $ 59,141         $ 123,675    
Short-term notes payable     11,800           7,200    
Total current liabilities     70,941           130,875    
Long-term notes payable     62,000           54,750    
Total liabilities     132,941           185,625    
Equity                      
Common stock, $5 par value     171,750           156,250    
Paid-in capital in excess of par, common stock     46,500           0    
Retained earnings     180,340           119,065    
Total liabilities and equity   $ 531,531         $ 460,940    
 

  

FORTEN COMPANY
Income Statement
For Current Year Ended December 31
Sales       $ 612,500    
Cost of goods sold         291,000    
Gross profit         321,500    
Operating expenses              
Depreciation expense $ 26,750          
Other expenses   138,400     165,150    
Other gains (losses)              
Loss on sale of equipment         (11,125 )  
Income before taxes         145,225    
Income taxes expense         32,650    
Net income       $ 112,575    
 

 
Additional Information on Current Year Transactions

  1. The loss on the cash sale of equipment was $11,125 (details in b).
  2. Sold equipment costing $64,875, with accumulated depreciation of $36,125, for $17,625 cash.
  3. Purchased equipment costing $102,375 by paying $42,000 cash and signing a long-term note payable for the balance.
  4. Borrowed $4,600 cash by signing a short-term note payable.
  5. Paid $53,125 cash to reduce the long-term notes payable.
  6. Issued 3,100 shares of common stock for $20 cash per share.
  7. Declared and paid cash dividends of $51,300.

 

**Problem 16-3A Indirect: Statement of Cash Flows**

**Objective:**
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

---

- **Cash flows from operating activities**

  - [Space for amounts and descriptions]

- **Adjustments to reconcile net income to net cash provided by operations:**

  - [Space for amounts and descriptions]

- **Cash flows from investing activities**

  - [Space for amounts and descriptions]

  - **Total**: $0

---

**Explanation:**

This template is used to prepare a statement of cash flows using the indirect method. It starts with cash flows from operating activities, making necessary adjustments to reconcile net income to net cash provided by operations. The template also includes a section for cash flows from investing activities. The total cash flow is shown at the bottom of the table.
Transcribed Image Text:**Problem 16-3A Indirect: Statement of Cash Flows** **Objective:** 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 --- - **Cash flows from operating activities** - [Space for amounts and descriptions] - **Adjustments to reconcile net income to net cash provided by operations:** - [Space for amounts and descriptions] - **Cash flows from investing activities** - [Space for amounts and descriptions] - **Total**: $0 --- **Explanation:** This template is used to prepare a statement of cash flows using the indirect method. It starts with cash flows from operating activities, making necessary adjustments to reconcile net income to net cash provided by operations. The template also includes a section for cash flows from investing activities. The total cash flow is shown at the bottom of the table.
**Cash Flow Statement Overview**

The cash flow statement provided outlines the financial activities of a company with a focus on two key areas: investing activities and financing activities. Below is a detailed transcription and explanation of the elements included:

### Cash Flows from Investing Activities
- **Blank Entry 1**: [Description of activity, if known]
- **Blank Entry 2**: [Description of activity, if known]
- **Blank Entry 3**: [Description of activity, if known]
- **Blank Entry 4**: [Description of activity, if known]
- **Total**: $0

This section typically involves transactions related to the acquisition and disposal of long-term assets and other investments of the company, such as property, equipment, or securities.

### Cash Flows from Financing Activities
- **Blank Entry 1**: [Description of activity, if known]
- **Blank Entry 2**: [Description of activity, if known]
- **Blank Entry 3**: [Description of activity, if known]
- **Blank Entry 4**: [Description of activity, if known]
- **Total**: $0

Financing activities relate to transactions with the company's owners or debtors. This might include issuing stock, paying dividends, and borrowing or repaying loans.

### Summary
- **Net Increase (Decrease) in Cash**: $0
- **Cash Balance at December 31, Prior Year**: $0
- **Cash Balance at December 31, Current Year**: $0

This summary provides a snapshot of the net changes in cash, starting and ending cash balances for the year.

### Diagram Description
The document consists of formatted sections for entering numerical values related to cash transactions. Each section has placeholders, presumably for inputting specific financial data, but currently, all amounts are listed as $0, indicating no recorded activity for the period in question.
Transcribed Image Text:**Cash Flow Statement Overview** The cash flow statement provided outlines the financial activities of a company with a focus on two key areas: investing activities and financing activities. Below is a detailed transcription and explanation of the elements included: ### Cash Flows from Investing Activities - **Blank Entry 1**: [Description of activity, if known] - **Blank Entry 2**: [Description of activity, if known] - **Blank Entry 3**: [Description of activity, if known] - **Blank Entry 4**: [Description of activity, if known] - **Total**: $0 This section typically involves transactions related to the acquisition and disposal of long-term assets and other investments of the company, such as property, equipment, or securities. ### Cash Flows from Financing Activities - **Blank Entry 1**: [Description of activity, if known] - **Blank Entry 2**: [Description of activity, if known] - **Blank Entry 3**: [Description of activity, if known] - **Blank Entry 4**: [Description of activity, if known] - **Total**: $0 Financing activities relate to transactions with the company's owners or debtors. This might include issuing stock, paying dividends, and borrowing or repaying loans. ### Summary - **Net Increase (Decrease) in Cash**: $0 - **Cash Balance at December 31, Prior Year**: $0 - **Cash Balance at December 31, Current Year**: $0 This summary provides a snapshot of the net changes in cash, starting and ending cash balances for the year. ### Diagram Description The document consists of formatted sections for entering numerical values related to cash transactions. Each section has placeholders, presumably for inputting specific financial data, but currently, all amounts are listed as $0, indicating no recorded activity for the period in question.
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