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Great Adventures Problem AP11-1 The income statement, balance sheets, and additional information for Great Adventures, Inc.,...

Great Adventures Problem AP11-1

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, 2022
Net revenues: $ 185,370
Expenses:
Cost of goods sold $ 39,500
Operating expenses 63,600
Depreciation expense 18,750
Interest expense 9,279
Income tax expense 15,500
Total expenses 146,629
Net income $ 38,741
GREAT ADVENTURES, INC.
Balance Sheets
December 31, 2022 and 2021
   Increase (I) or
2022 2021 Decrease (D)
Assets
Current assets:
Cash $ 256,928 $ 57,900 $ 199,028 (I)
Accounts receivable 49,400 0 49,400 (I)
Inventory 9,000 0 9,000 (I)
Other current assets 1,100 5,300 4,200 (D)
Long-term assets:
Land 700,000 0 700,000 (I)
Buildings 860,000 0 860,000 (I)
Equipment 82,600 50,000 32,600 (I)
Accumulated depreciation (27,250 ) (8,500 ) 18,750 (I)
Total assets $ 1,931,778 $ 111,500
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 29,600 $ 3,200 $ 26,400 (I)
Interest payable 850 850
Income tax payable 15,500 14,200 1,300 (I)
Other current liabilities 27,000 0 27,000 (I)
Notes payable (current and long-term) 723,437 32,000 691,437 (I)
Stockholders’ equity:
Common stock 140,000 20,000 120,000 (I)
Paid-in capital 1,086,000 0 1,086,000 (I)
Retained earnings 59,391 34,450 24,941 (I)
Treasury stock (150,000 ) 0 (150,000 ) (I)
Total liabilities and stockholders’ equity $ 1,931,778 $ 111,500

Additional Information for 2022:

  1. Land of $700,000 was obtained by issuing a note payable to the seller.
  2. Buildings of $860,000 and equipment of $32,600 were purchased using cash.
  3. Monthly payments during the year reduced notes payable by $8,563.
  4. Issued common stock for $1,200,000.
  5. Purchased 12,000 shares of treasury stock for $25 per share.
  6. Sold 6,000 shares of treasury stock at $26 per share.
  7. Declared and paid a cash dividend of $13,800.

Required:

Prepare the statement of cash flows for the year ended December 31, 2022, using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)

Solutions

Expert Solution

Solution

GREAT ADVENTURES INC.
Cash Flow Statement
For year ended 31st December 2022
A. Cash Flows from Operating Activity
Net Income $           38,741.00
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense $           18,750.00
Changes in current operating assets and liabilities:
Increase in Accounts receivables $        (49,400.00)
Increase in Accounts payable $           26,400.00
Increase in Inventory $           (9,000.00)
Decrease in other current assets $             4,200.00
Increase in taxes payable $             1,300.00
Increase in other current liabilities $           27,000.00
Net cash flow from Operating activities $           57,991.00
B. Cash flows from Investing Activities
Purchase of equipment $        (32,600.00)
Purchase of Building $      (860,000.00)
Net cash flow used for investing activities $      (892,600.00)
C. Cash Flows from Financing activities
Cash received from sale of common stock $     1,200,000.00
Cash paid for dividends $        (13,800.00)
Purchase of Treasury stock $      (300,000.00)
Reissue of Treasury stock $        156,000.00
Repayment of notes payable $           (8,563.00)
Cash flows from Financing activities $     1,033,637.00
Net Increase (Decrease) in Cash [A+B+C] $        199,028.00
Cash at the beginning $           57,900.00
Cash at the end $        256,928.00
Note: Non cash activity
Issue of notes payable in exchange of Land $        700,000.00

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