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    Complete Statements of Cash Flows

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    Prepare a complete statement of cash flows; report its operating activities using the direct method.

    Forten Company, a merchandiser, recently completed its calendar-year 2008 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. Forten’s balance sheets and income statement follow:

    FORTEN COMPANY
    Comparative Balance Sheets
    December 31, 2008 and 2007
    2008 2007
    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 0
    Retained earnings 185,000 120,125
    Total liabilities and equity $ 513,391 $ 439,800

    FORTEN COMPANY
    Income Statement
    For Year Ended December 31, 2008
    Sales $ 582,500
    Cost of goods sold 285,000
    Gross profit 297,500
    Operating expenses
    Depreciation expense $ 20,750
    Other expenses 132,400 153,150
    Other gains (losses)
    Loss on sale of equipment 5,125
    Income before taxes $ 139,125
    Income taxes expense 24,250
    Net income $ 114,975

    Additional Information on Year 2008 Transactions

    a. The loss on the cash sale of equipment was $5,125 (details in b).
    b. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash.
    c. Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term note payable for the balance.
    d. Borrowed $4,000 cash by signing a short-term note payable.
    e. Paid $50,125 cash to reduce the long-term notes payable.
    f. Issued 2,500 shares of common stock for $20 cash per share.
    g. Declared and paid cash dividends of $50,100.

    Required:

    Prepare a complete statement of cash flows; report its operating activities using the direct method. (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)

    FORTEN COMPANY
    Statement of Cash Flows
    For Year Ended December 31, 2008
    Cash flows from operating activities

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    https://brainmass.com/business/accounting/complete-statements-cash-flows-137211

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