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)	$ 555,000
Sales revenue (MU watches)	130,000
Total revenues		$ 685,000
Expenses:
Cost of goods sold (watches)	76,000
Operating expenses	304,876
Depreciation expense	56,000
Interest expense	30,324
Income tax expense	60,600
Total expenses		527,800
Net income		$ 157,200

GREAT ADVENTURES, INC. Balance Sheets December 31, 2020 and 2019
	2020			2019			Increase (I) or Decrease (D)
Assets
Current assets:
Cash	$	313,784		$	144,000		$	169,784	(I)
Accounts receivable		54,000			41,000			13,000	(I)
Inventory		17,900			14,600			3,300	(I)
Other current assets		13,900			11,600			2,300	(I)
Long-term assets:
Land		600,000			0			600,000	(I)
Buildings		1,000,000			0			1,000,000	(I)
Equipment		71,000			71,000
Accumulated depreciation		(82,750)			(26,750)			56,000	(I)
Total assets	$	1,987,834		$	255,450
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	12,900		$	9,600		$	3,300	(I)
Interest payable		810			810
Income tax payable		60,600			41,000			19,600	(I)
Long-term liabilities:
Notes payable		555,284			33,000			522,284	(I)
Stockholders' Equity:
Common stock		120,000			20,000			100,000	(I)
Paid-in capital		1,105,000			0			1,105,000	(I)
Retained earnings		193,240			151,040			42,200	(I)
Treasury stock		(60,000)			0			(60,000)	(I)
Total liabilities and stockholders’ equity	$	1,987,834		$	255,450

Additional Information for 2020:

1. Borrowed $560,000 in January 2020. Made 12 monthly payments during the year, reducing the balance of the loan by $37,716.

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

3. Purchased 10,000 shares of treasury stock for $12 per share.

4. Reissued 5,000 shares of treasury stock at $13 per share.

5. Declared and paid a cash dividend of $115,000.

     

Required:

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

Answer 1

GREAT ADVENTURES INC
Partial Statement of Cash Flows
For the 3 months Ended December 31, 2020
Cash flows from operating activities
Net Income		$       157,200
Adjustments to reconcile net income to :
Depreciation expenses	$         56,000
Increase in accounts receivable	$       (13,000)
Increase in inventory	$         (3,300)
Increase in other current assets	$         (2,300)
Increase in accounts payable	$            3,300
Increase in income tax payable	$         19,600
Net cash flow from operating activities		$       217,500
Cash flows from investing activities
Cash paid for purchase of Land	$     (600,000)
Cash paid for purchase of Equipment	$ (1,000,000)
Net cash used by investing activities		$ (1,600,000)
Cash flows from financing activities
Cash received from borrowings	$       560,000
Cash paid for repayment of borrowings	$       (37,716)
Cash received from issuance of common stock	$   1,200,000
Cash paid for purchase of treasury stock	$     (120,000)
Cash received from reissue of treasury stock	$         65,000
Cash paid for dividends	$     (115,000)
Net cash provided by financing activities		$   1,552,284
Net Decrease in cash and cash equivalents		$       169,784
Cash and cash equivalents at beginning of period		$       144,000
Cash and cash equivalents at end of period		$       313,784