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.
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.
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.
Prepare a complete statement of cash flows; report its operating activities using the indirect method.
Case study Rubric
Presents the correct amount of cash by operating activities
Demonstrates knowledge and understanding of content and applicability to prepare statement of cash flow by using indirect method
The entire worksheet is correctly prepared with no major errors.
Presents the correct amount of cash by investing activities
Presents the correct amount of cash by financing activities
Provides the net changes in cash
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