Case Study Problem: The Statement of Cash Flow
After finishing learning this chapter, it's time to test your ability and skills to analyze company's financial data and prepare the statement of Cash flow.
Read the given company's 2016 and 2017 financial information.
Prepare the statement of cash flow in form of Word document, Excel or PDF files.
Plagiarism and copying will not be tolerated; no credit will be given for any work in question.
Forten Company, a merchandiser, recently completed its calendar-year 2017 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 income statement and balance sheets follow.
FORTEN COMPANY
Income Statement
For Year Ended December 31, 2017
|
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
|
|
139,225
|
|
Income taxes expense
|
|
24 250
|
|
Net income
|
|
$114,975
|
Comparative Balance Sheets December 31, 2017 and 2016
|
Assets
|
2017
|
2016
|
|
|
|
|
Cash
|
$ 49,800
|
$ 73,500
|
|
Accounts receivable
|
65,810
|
50,625
|
|
Inventory
|
275,656
|
251,800
|
|
Prepaid expenses
|
1 250
|
1 875
|
|
Total current assets
|
392,516
|
377,800
|
|
Equipment
|
157,500
|
108,000
|
|
Accum. depreciation-Equipment
|
J36,625)
|
J46,000)
|
|
Total assets
|
$513,391
|
$439,800
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
Accounts payable
|
$ 53,141
|
$114,675
|
|
Short-term notes payable
|
10 000
|
6 000
|
|
Total current liabilities
|
63,141
|
120,675
|
|
Long-term notes payable
|
65 000
|
48 750
|
|
Total liabilities
|
128,141
|
169,425
|
|
Equity
|
|
|
|
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
|
Additional Information on Year 2017 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.