Forten Company, a merchandiser, recently completed its calendar-year 2015 operations

Forten Company, a merchandiser, recently completed its calendar-year 2015 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 Comparative Balance Sheets December 31, 2015 and 2014
	2015			2014
Assets
Cash	$	70,944		$	72,000
Accounts receivable		79,125			61,125
Inventory		259,906			230,800
Prepaid expenses		1,600			2,100
Total current assets		411,575			366,025
Equipment		162,500			120,000
Accum. depreciation—Equipment		(53,800)			(60,000)
Total assets	$	520,275		$	426,025
Liabilities and Equity
Accounts payable	$	58,075		$	111,200
Short-term notes payable		10,000			6,000
Total current liabilities		68,075			117,200
Long-term notes payable		24,175			43,000
Total liabilities		92,250			160,200
Equity
Common stock, $5 par value		167,500			150,000
Paid-in capital in excess of par, common stock		52,500			0
Retained earnings		208,025			115,825
Total liabilities and equity	$	520,275		$	426,025
FORTEN COMPANY Income Statement For Year Ended December 31, 2015   Sales       $ 635,000     Cost of goods sold         306,000              Gross profit         329,000     Operating expenses                  Depreciation expense $ 20,000                Other expenses   128,300       148,300              Other gains (losses)                  Loss on sale of equipment         (4,500)             Income before taxes         176,200     Income taxes expense         31,000              Net income       $ 145,200            Additional Information on Year 2015 Transactions a. The loss on the cash sale of equipment was $4,500 (details in b). b. Sold equipment costing $45,800, with accumulated depreciation of $26,200, for $15,100 cash. c. Purchased equipment costing $88,300 by paying $63,000 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 $44,125 cash to reduce the long-term notes payable. f. Issued 3,500 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $53,000. 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.)

Explanation: Increase in accounts receivable ($79,125 –  $61,125) = $(18,000) Increase in inventory ($259,906 – $230,800) = $(29,106) Decrease in prepaid expenses ($2,100 – $1,600) = $500 Decrease in accounts payable ($111,200 – $58,075) = $(53,125) Cash received from issuing stock (3,500 × $20)= $70,000 A company reported average total assets of $247,000 in 2014 and $290,000 in 2015. Its net operating cash flow was $20,450 in 2014 and $28,250 in 2015.

Complete the below table to calculate its cash flow on total assets ratio for both years.

Explanation:

2014: $20,450 / $247,000 = 8.3%

2015: $28,250 / $290,000 = 9.7%