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

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) $ 547,000        
     Sales revenue (MU watches) 122,000        
       Total revenues $ 669,000      
  Expenses:
         Cost of goods sold (watches) 72,000        
         Operating expenses 304,476        
         Depreciation expense 52,000        
         Interest expense 29,924        
         Income tax expense 58,200        
            Total expenses 516,600      
  Net income $ 152,400      


GREAT ADVENTURES, INC.
Balance Sheets
December 31, 2020 and 2019
     2020     2019 Increase (I)
or
Decrease (D)
  Assets
  Current assets:
      Cash $ 327,832 $ 140,000 $ 187,832 (I)
      Accounts receivable 48,000 37,000 11,000 (I)
      Inventory 17,300 14,200 3,100 (I)
      Other current assets 13,300 11,200 2,100 (I)
  Long-term assets:
      Land 300,000 0 300,000 (I)
      Buildings 1,200,000 0 1,200,000 (I)
      Equipment 67,000 67,000
      Accumulated depreciation (77,750) (25,750) 52,000 (I)
        Total assets $ 1,895,682 $ 243,650
  Liabilities and Stockholders' Equity
  Current liabilities:
     Accounts payable $ 12,300 $ 9,200 $ 3,100 (I)
     Interest payable 770 770
     Income tax payable 58,200 39,000 19,200 (I)
  Long-term liabilities:
     Notes payable 513,332 31,000 482,332 (I)
  Stockholders' Equity:
     Common stock 130,000 30,000 100,000 (I)
     Paid-in capital 1,105,000 0 1,105,000 (I)
     Retained earnings 161,080 133,680 27,400 (I)
     Treasury stock (85,000) 0 (85,000) (I)
        Total liabilities and stockholders’ equity $ 1,895,682 $ 243,650


Additional Information for 2020:

1. Borrowed $520,000 in January 2020. Made 12 monthly payments during the year, reducing the balance of the loan by $37,668.

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

3. Purchased 10,000 shares of treasury stock for $17 per share.

4. Reissued 5,000 shares of treasury stock at $18 per share.

5. Declared and paid a cash dividend of $125,000.

     

Required:

Prepare the statement of cash flows for the year ended December 31, 2020, using the indirect method. (List cash outflows as negative amounts.)

Solutions

Expert Solution

Great Adventures Inc
Statement of Cash flows
For the Year Ended December 31, 2020
Cash flows from operating activities
Net income $       152,400
Adjustment to reconcile net income:
Depreciation expense $         52,000
Increase in accounts receivable $       (11,000)
Increase in inventory $         (3,100)
Increase in other current assets $         (2,100)
Increase in accounts payable $            3,100
Increase in income tax payable $         19,200
Net cash provided by operating activities $       210,500
Cash flows from investing activities
Cash paid for purchase of building $ (1,200,000)
Cash paid for purchase of land $     (300,000)
Net cash used by investing activities $ (1,500,000)
Cash flows from financing activities
Cash paid for dividends $     (125,000)
Cash received from issuance of common stock $   1,200,000
Cash paid for purchase of treasury stock $     (170,000) 10000*17
Cash received from issuance of treasury stock $         90,000 5000*18
Cash received issuance of note $       520,000
Cash paid for note payable $       (37,668)
Net cash provided by financing activities $   1,477,332
Net Increase in cash and cash equivalents $       187,832
Cash and cash equivalents at beginning of period $       140,000
Cash and cash equivalents at end of period $       327,832

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