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. The company’s income statement and balance sheets follow.
FORTEN COMPANY
Comparative Balance Sheets
December 31, 2017 and 2016
2017 2016
Assets
Cash $ 51,400 $ 74,500
Accounts receivable 67,310 51,625
Inventory 277,156 252,800
Prepaid expenses 1,300 2,025
Total current assets 397,166 380,950
Equipment 156,500 109,000
Accum. depreciation—Equipment (37,125) (46,500)
Total assets $ 516,541 $ 443,450
Liabilities and Equity
Accounts payable $ 54,141 $ 116,175
Short-term notes payable 10,300 6,200
Total current liabilities 64,441 122,375
Long-term notes payable 64,500 49,750
Total liabilities 128,941 172,125
Equity
Common stock, $5 par value 164,750 151,250
Paid-in capital in excess of par, common stock 38,500 0
Retained earnings 184,350 120,075
Total liabilities and equity $ 516,541 $ 443,450
FORTEN COMPANY
Income Statement
For Year Ended December 31, 2017
Sales $ 587,500
Cost of goods sold 286,000
Gross profit 301,500
Operating expenses
Depreciation expense $ 21,750
Other expenses 133,400 155,150
Other gains (losses)
Loss on sale of equipment (6,125)
Income before taxes 140,225
Income taxes expense 25,650
Net income $ 114,575
Problem 12-4AA Indirect: Cash flows spreadsheet LO P1, P2, P3, P4
Additional Information on Year 2017 Transactions
1. Net income was $114,575.
2. Accounts receivable increased.
3. Inventory increased.
4. Prepaid expenses decreased.
5. Accounts payable decreased.
6. Depreciation expense was $21,750.
7. Sold equipment costing $49,875, with accumulated depreciation of $31,125, for $12,625 cash. This yielded a loss of $6,125.
8. Purchased equipment costing $97,375 by paying $32,000 cash and (i.) by signing a long-term note payable for the balance.
9. Borrowed $4,100 cash by signing a short-term note payable.
10. Paid $50,625 cash to reduce the long-term notes payable.
11. Issued 2,600 shares of common stock for $20 cash per share.