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 COMPANY

Comparative Balance Sheets

December 31, 2013 and 2012

2013 2012

  Assets

  Cash $ 68,039    $ 71,500  

  Accounts receivable 78,425    60,625  

  Merchandise inventory 260,656    231,800  

  Prepaid expenses 1,580    2,075  

  Equipment 161,475    119,000  

  Accum. Depreciation Equipment (52,750)   (59,000) 

    Total assets $ 517,425    $ 426,000  

    Liabilities and Equity

  Accounts payable $ 58,175    $ 111,050  

  Short-term notes payable 9,800    5,900  

  Long-term notes payable 24,725    42,500  

  Common stock, $5 par value 166,750    149,750  

  Paid-in capital in excess of par, common stock 51,000    0  

  Retained earnings 206,975    116,800  

    Total liabilities and equity $ 517,425    $ 426,000  

  FORTEN COMPANY

Income Statement

For Year Ended December 31, 2013

  Sales $ 632,500

  Cost of goods sold 305,000

  Gross profit 327,500

  Operating expenses

  Depreciation expense $ 19,900

  Other expenses 129,600 149,500

  Other gains (losses)

  Loss on sale of equipment (4,475)

  Income before taxes 173,525 

  Income taxes expense 30,750 

  Net income $ 142,775

  Additional Information on Year 2013 Transactions

a. The loss on the cash sale of equipment was $4,475 (details in b).

b. Sold equipment costing $45,675, with accumulated depreciation of $26,150, for $15,050 cash.

c. Purchased equipment costing $88,150 by paying $62,000 cash and signing a long-term note payable for the balance.

d. Borrowed $3,900 cash by signing a short-term note payable.

e. Paid $43,925 cash to reduce the long-term notes payable.

f. Issued 3,400 shares of common stock for $20 cash per share.

g. Declared and paid cash dividends of $52,600.

Required:

1. Prepare a complete statement of cash flows; report its operating activities using the indirect method.(Amounts to be deducted should be indicated with a minus sign.)