Question

Forrest Corporation is a producer of manufacturing equipment. You have been retained by the company to advise it in the preparation of a statement of cash flows. Forest uses the direct method in reporting net cash flows from operating activities. You have obtained the following information concerning certain events and transactions for the company during the year ended December 31, 2018.

a) The board of directors declared a $120,000 cash dividend on December 15, 2018, payable on January 15, 2019, to stockholders of record on January 5, 2019.

b) On August 27, 2018, Forrest purchased $80,000 of its common stock on the open market.

c) Depreciation expense of $10,000 was included in the income statement.

d) Net income for the year was $500,000, and included an uninsured inventory loss of $130,220 from a theft.

e) Uncollectible accounts receivable of $14,000 were written off against the allowance for uncollectible accounts. Also, $23,000 of bad debts expense was included in net income; the same amount was added to the allowance for uncollectible accounts.

f) On August 1, 2018, a building and some land were purchased for $230,000. Forrest gave in payment: $60,000 cash, $70,000 market value of its unissued common stock, and a $100,000 mortgage note.

g) Forest realized a $1,300 gain on the sale of a machine. The machine originally cost $22,000, of which $14,000 was undepreciated at the time of the sale.

Required:Write a brief explanation of how each of the items above should be disclosed in Forrest's statement of cash flows for 2018. If any item is neither an inflow or outflow of case, explain why it is not and indicate how the item should be disclosed, if at all, in Forrest's statement of cash flows for any year, past, present, or future.

Item	Treatment
a. $120,000 cash dividend
b. $80,000 purchase of common stock
c. Depreciation expense of $10,000
d1. Net income of $500,000
d2. $130,220 uninsured inventory loss
e1. $14,000 write off uncollectible accounts
e2. $23,000 of bad debts expense
f1. $230,000 purchase of building and land
f2. $60,000 cash payment
f3. $70,000 payment of common stock
f4. $100,00 mortgage note
g. $1,300 gan on sale of machine

Answer 1