In: Accounting
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:
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.)
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 |