Question

Forten Company, a merchandiser, recently completed itscalendar-year 2013 operations. For the year, (1) all sales arecredit sales, (2) all credits to Accounts Receivable reflect cashreceipts from customers, (3) all purchases of inventory are oncredit, (4) all debits to Accounts Payable reflect cash paymentsfor inventory, and (5) Other Expenses are paid in advance and areinitially debited to Prepaid Expenses. The company’s balance sheetsand income statement follow.

FORTEN COMPANY Comparative Balance Sheets December 31, 2013 and 2012
	2013			2012
Assets
Cash	$	49,000		$	73,000
Accountsreceivable		65,860			50,000
Merchandiseinventory		275,500			252,000
Prepaidexpenses		1,250			1,500
Equipment		157,500			107,000
Accum.depreciation—Equipment		(29,625)			(40,000)
Total assets	$	519,485		$	443,500
Liabilitiesand Equity
Accountspayable	$	62,510		$	115,000
Short-term notespayable		10,000			7,000
Long-term notespayable		62,500			48,750
Common stock, $5 parvalue		162,250			150,500
Paid-in capital inexcess of par, common stock		35,250			0
Retainedearnings		186,975			122,250
Total liabilitiesand equity	$	519,485		$	443,500

FORTEN COMPANY Income Statement For Year Ended December 31, 2013
Sales				$	583,500
Cost of goodssold					284,000
Gross profit					299,500
Operatingexpenses
Depreciation expense	$	20,000
Other expenses		132,800			152,800
Other gains(losses)
Loss on sale ofequipment					(5,375)
Income beforetaxes					141,325
Income taxesexpense					25,500
Net income				$	115,825

AdditionalInformation on Year 2013 Transactions
a.	The loss on the cash sale of equipment was $5,375 (details inb).
b.	Sold equipment costing $47,250, with accumulated depreciation of$30,375, for $11,500 cash.
c.	Purchased equipment costing $97,750 by paying $30,000 cash andsigning a long-term note payable for the balance.
d.	Borrowed $3,000 cash by signing a short-term note payable.
e.	Paid $54,000 cash to reduce the long-term notes payable.
f.	Issued 2,350 shares of common stock for $20 cash per share.
g.	Declared and paid cash dividendsof $51,100.

Required:

Prepare a complete statement of cash flows; report its operatingactivities according to the direct method.(