Question

The income statement, balance sheets, and additional information for Great Adventures, Inc., are provided below.

                 

GREAT ADVENTURES, INC. Income Statement For the Year Ended December 31, 2020
Revenues:
Service revenue (clinic, racing, TEAM)	$ 545,000
Sales revenue (MU watches)	120,000
Total revenues		$ 665,000
Expenses:
Cost of goods sold (watches)	71,000
Operating expenses	304,376
Depreciation expense	51,000
Interest expense	29,824
Income tax expense	57,600
Total expenses		513,800
Net income		$ 151,200

GREAT ADVENTURES, INC. Balance Sheets December 31, 2020 and 2019
	2020			2019			Increase (I) or Decrease (D)
Assets
Current assets:
Cash	$	325,094		$	139,000		$	186,094	(I)
Accounts receivable		46,500			36,000			10,500	(I)
Inventory		17,150			14,100			3,050	(I)
Other current assets		13,150			11,100			2,050	(I)
Long-term assets:
Land		400,000			0			400,000	(I)
Buildings		1,100,000			0			1,100,000	(I)
Equipment		66,000			66,000
Accumulated depreciation		(76,500)			(25,500)			51,000	(I)
Total assets	$	1,891,394		$	240,700
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	12,150		$	9,100		$	3,050	(I)
Interest payable		760			760
Income tax payable		57,600			38,500			19,100	(I)
Long-term liabilities:
Notes payable		502,844			30,500			472,344	(I)
Stockholders' Equity:
Common stock		125,000			25,000			100,000	(I)
Paid-in capital		1,105,000			0			1,105,000	(I)
Retained earnings		168,040			136,840			31,200	(I)
Treasury stock		(80,000)			0			(80,000)	(I)
Total liabilities and stockholders’ equity	$	1,891,394		$	240,700

Additional Information for 2020:

1. Borrowed $510,000 in January 2020. Made 12 monthly payments during the year, reducing the balance of the loan by $37,656.

2. Issued common stock for $1,200,000.

3. Purchased 10,000 shares of treasury stock for $16 per share.

4. Reissued 5,000 shares of treasury stock at $17 per share.

5. Declared and paid a cash dividend of $120,000.

Prepare the statement of cash flows for the year ended December 31, 2020, using the indirect method.

Answer 1

Great Adventures Inc
Statement of Cash flows
For the Year Ended December 31, 2022
Cash flows from operating activities
Net income		$       151,200
Adjustment to reconcile net income
Depreciation expense	$         51,000
Increase in accounts receivable	$       (10,500)
Increase in inventory	$         (3,050)
Increase in other current assets	$         (2,050)
Increase in accounts payable	$            3,050
Increase in income tax payable	$         19,100
		$         57,550
Net cash provided by operating activities		$       208,750
Cash flows from investing activities
Cash paid for purchase of building	$ (1,100,000)
Cash paid for purchase of land	$     (400,000)
Net cash used by investing activities		$ (1,500,000)
Cash flows from financing activities
Cash paid for dividends	$     (120,000)
Cash received from issuance of common stock	$   1,200,000		100000+1100000
Cash paid for purchase of treasury stock	$     (160,000)		10000*16
Cash received from issuance of treasury stock	$         85,000		5000*17
Cash received issuance of note	$       510,000
Cash paid for note payable	$       (37,656)
Net cash provided by financing activities		$   1,477,344
Net Increase in cash and cash equivalents		$       186,094
Cash and cash equivalents at beginning of period		$       139,000
Cash and cash equivalents at end of period		$       325,094

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