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)	$ 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.)

Answer 1

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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