Forten Company’s current year income statement, comparative balance sheets, and additional information follow. For the year,

1. (1) all sales are credit sales,
2. (2) all credits to Accounts Receivable reflect cash receipts from customers,
3. (3) all purchases of inventory are on credit, and
4. (4) all debits to Accounts Payable reflect cash payments for inventory.

FORTEN COMPANY
Income Statement
For Current Year Ended December 31
Sales		$ 622,500
Cost of goods sold		293,000
Gross profit		329,500
Operating expenses (excluding depreciation)	$ 140,400
Depreciation expense	28,750	169,150
Other gains (losses)
Loss on sale of equipment		(13,125)
Income before taxes		147,225
Income taxes expense		35,450
Net income		$ 111,775

FORTEN COMPANY
Comparative Balance Sheets
December 31
	Current Year	Prior Year
Assets
Cash	$ 61,900	$ 81,500
Accounts receivable	77,850	58,625
Inventory	287,656	259,800
Prepaid expenses	1,290	2,055
Total current assets	428,696	401,980
Equipment	149,500	116,000
Accumulated depreciation—Equipment	(40,625)	(50,000)
Total assets	$ 537,571	$ 467,980
Liabilities and Equity
Accounts payable	$ 61,141	$ 126,675
Long-term notes payable	73,400	64,350
Total liabilities	134,541	191,025
Equity
Common stock, $5 par value	174,750	158,250
Paid-in capital in excess of par, common stock	49,500	0
Retained earnings	178,780	118,705
Total equity	403,030	276,955
Total liabilities and equity	$ 537,571	$ 467,980

Additional Information on Current Year Transactions

1. The loss on the cash sale of equipment was $13,125 (details in b).
2. Sold equipment costing $70,875, with accumulated depreciation of $38,125, for $19,625 cash.
3. Purchased equipment costing $104,375 by paying $46,000 cash and signing a long-term notes payable for the balance.
4. Paid $49,325 cash to reduce the long-term notes payable.
5. Issued 3,300 shares of common stock for $20 cash per share.
6. Declared and paid cash dividends of $51,700.

Required:

1. Prepare a complete statement of cash flows using the indirect method for the current year.

2. Prepare a complete statement of cash flows using a spreadsheet using the indirect method.

Note: Enter all amounts as positive values.

Note: Enter amounts to be deducted as negative values.

Solution – Forten Company’s current year income statement

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