1.
1.70 points Forten Company, a merchandiser, recently completed its calendar year 2013 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 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
COMPANY Comparative Balance Sheets December 31, 2013 and 2012 2012 2013 Assets Cash
49,800 73,500 Accounts receivable 65,810 50,625 Merchandise inventory 275.656 251.800
Prepaid expenses 1,250 1,875 Equipment 157,500 108,000 Accum, depreciation Equipment
(36,625) (46,000) Total assets 513,391 439,800 Liabilities and Equity Accounts payable 53,141
114,675 Short-term notes payable 10,000 6.000 Long-term notes payable 65,000 48,750
Common stock, $5 par value 162.750 150.250 Paid-in capital in excess of par, common stock
37,500 Retained earnings 185.000 120,125 Total liabilities and equity 513,391 439,800
FORTEN COMPANY Income Statement For Year Ended December 31, 2013 $582,500 Sales
285,000 Cost of goods sold 297,500 Gross profit Operating expenses 20,750 Depreciation
expense 132,400 153,150 Other expenses Other gains (losses) Loss on sale of equipment (5,125)
139 225 Income before taxes 24 250 ncome taxes expense $114,975
Solution
Cash flows from operating activities:
Net income $114,975
Depreciation expense $20,750
Increase in merchandise inventory -$23,856
Loss on sale of equipment $5,125
Decrease in prepaid expenses $625
Increase in accounts receivable -$15,185
Decrease in accounts payable -$61,534
Increase in short-term notes payable $4,000

2.
A. Net cash flows from operating activities $44,900
Cash flows for investing activities:
Cash received from sale of equipment $11,625
Cash used to purchase equipment -$30,000
B. Net cash flows for investing activities -$18,375
Cash flows for financing activities :
Issuance of common stock $50,000
long-term note payable -$50,125
Dividends -$50,100
C.Net cash flows for financing activities -$50,225
Net decrease in cash (A+B+C) -$23,700
Add:Cash balance at the beginning $73,500
Cash balance at the end $49,800