Question

The income statement, balance sheets, and additional information for Virtual Gaming Systems are provided.     VIRTUAL GAMING SYSTEMS Income Statement For the Year Ended December 31, 2018   Net sales $ 2,600,000   Gain on sale of land 7,000           Total revenues 2,607,000   Expenses:        Cost of goods sold $ 1,650,000          Operating expenses 615,000          Depreciation expense 33,000          Interest expense 34,000        Income tax expense 80,000           Total expenses 2,412,000   Net income $ 195,000

VIRTUAL GAMING SYSTEMS Balance Sheets December 31 2018 2017   Assets   Current assets:      Cash $ 409,500    $ 343,800         Accounts receivable 64,000    80,000         Inventory 160,000    145,000         Prepaid rent 4,600    7,200      Long-term assets:      Investments 205,000    110,000         Land 215,000    270,000         Equipment 250,000    220,000         Accumulated depreciation (143,000) (110,000)         Total assets $ 1,165,100    $ 1,066,000      Liabilities and Stockholders' Equity   Current liabilities:      Accounts payable $ 35,000    $ 98,000         Interest payable 5,100    4,000         Income tax payable 25,000    29,000      Long-term liabilities:      Notes payable 265,000    235,000      Stockholders' equity:      Common stock 460,000    400,000         Retained earnings 375,000    300,000            Total liabilities and stockholders’ equity $ 1,165,100    $ 1,066,000

Additional Information for 2018:

1. Purchase additional investment in stocks for $95,000.

2. Sell land costing $55,000 for $62,000, resulting in a $7,000 gain on sale of land.

3. Purchase $30,000 in equipment by borrowing $30,000 with a note payable due in three years. No cash is exchanged in the transaction.

4. Declare and pay a cash dividend of $120,000.

5. Issue common stock for $60,000.

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Required:

Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note. (List cash outflows and any decrease in cash as negative amounts.)

Answer 1

Interest paid in Cash = Opening balance+ Interest expense - Closing balance = 4,000 + 34,000 - 5,100 = 32,900

Income tax paid in Cash = Opening balance + Income tax expense - Closing balance = 29,000 + 80,000 - 25,000 = 84,000