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ACC - Forten Company, a merchandiser

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Question;Forten Company, a merchandiser, recently completed its calendar-year 2013 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 balance sheets and income statement follow.FORTEN COMPANYComparative Balance SheetsDecember 31, 2013 and 20122013 2012AssetsCash $ 49,200 $ 73,500Accounts receivable 65,880 56,000Merchandise inventory 277,000 251,500Prepaid expenses 1,000 1,800Equipment 158,000 107,000Accum. depreciation?Equipment (36,750) (46,000)Total assets $ 514,330 $ 443,800Liabilities and EquityAccounts payable $ 51,355 $ 111,000Short-term notes payable 9,000 7,000Long-term notes payable 62,500 48,250Common stock, $5 par value 162,000 151,000Paid-in capital in excess of par, common stock 33,000 0Retained earnings 196,475 126,550Total liabilities and equity $ 514,330 $ 443,800FORTEN COMPANYIncome StatementFor Year Ended December 31, 2013Sales $ 585,000Cost of goods sold 282,000Gross profit 303,000Operating expensesDepreciation expense $ 20,000Other expenses 133,200 153,200Other gains (losses)Loss on sale of equipment (5,625)Income before taxes 144,175Income taxes expense 24,250Net income $ 119,925Additional Information on Year 2013 Transactionsa.The loss on the cash sale of equipment was $5,625 (details in b).b.Sold equipment costing $46,500, with accumulated depreciation of $29,250, for $11,625 cash.c.Purchased equipment costing $97,500 by paying $30,000 cash and signing a long-term note payable for the balance.d.Borrowed $2,000 cash by signing a short-term note payable.e.Paid $53,250 cash to reduce the long-term notes payable.f.Issued 2,200 shares of common stock for $20 cash per share.g. Declared and paid cash dividends of $50,000.Required:Prepare a complete statement of cash flows, report its operating activities according to the direct method

 

Paper#43078 | Written in 18-Jul-2015

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