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
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) | $ 533,000 | |
Sales revenue (MU watches) | 108,000 | |
Total revenues | $ 641,000 | |
Expenses: | ||
Cost of goods sold (watches) | 65,000 | |
Operating expenses | 303,776 | |
Depreciation expense | 45,000 | |
Interest expense | 29,224 | |
Income tax expense | 54,000 | |
Total expenses | 497,000 | |
Net income | $ 144,000 | |
GREAT ADVENTURES, INC. Balance Sheets December 31, 2020 and 2019 | |||||||||
2020 | 2019 | Increase (I) or Decrease (D) | |||||||
Assets | |||||||||
Current assets: | |||||||||
Cash | $ | 289,666 | $ | 133,000 | $ | 156,666 | (I) | ||
Accounts receivable | 37,500 | 30,000 | 7,500 | (I) | |||||
Inventory | 16,250 | 13,500 | 2,750 | (I) | |||||
Other current assets | 12,250 | 10,500 | 1,750 | (I) | |||||
Long-term assets: | |||||||||
Land | 450,000 | 0 | 450,000 | (I) | |||||
Buildings | 1,000,000 | 0 | 1,000,000 | (I) | |||||
Equipment | 60,000 | 60,000 | |||||||
Accumulated depreciation | (69,000) | (24,000) | 45,000 | (I) | |||||
Total assets | $ | 1,796,666 | $ | 223,000 | |||||
Liabilities and Stockholders' Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 11,250 | $ | 8,500 | $ | 2,750 | (I) | ||
Interest payable | 700 | 700 | |||||||
Income tax payable | 54,000 | 35,500 | 18,500 | (I) | |||||
Long-term liabilities: | |||||||||
Notes payable | 439,916 | 27,500 | 412,416 | (I) | |||||
Stockholders' Equity: | |||||||||
Common stock | 120,000 | 20,000 | 100,000 | (I) | |||||
Paid-in capital | 1,106,000 | 0 | 1,106,000 | (I) | |||||
Retained earnings | 160,800 | 130,800 | 30,000 | (I) | |||||
Treasury stock | (96,000) | 0 | (96,000) | (I) | |||||
Total liabilities and stockholders equity | $ | 1,796,666 | $ | 223,000 | |||||
Additional Information for 2020:
1. Borrowed $450,000 in January 2020. Made 12 monthly payments during the year, reducing the balance of the loan by $37,584.
2. Issued common stock for $1,200,000.
3. Purchased 12,000 shares of treasury stock for $16 per share.
4. Reissued 6,000 shares of treasury stock at $17 per share.
5. Declared and paid a cash dividend of $114,000.
Required:
Prepare the statement of cash flows for the year ended December 31, 2020, using the indirect method. (List cash outflows as negative amounts.)
GREAT ADVENTURES, INC. Statement of Cash Flows For the Year Ended December 31, 2020 Cash Flows from Operating Activities $ 144,000 Net income Adjustments to reconcile net income to net cash flows from operating activities: Depreciation expense Increase in accounts receivable Decrease in inventory Increase in other current assets Increase in accounts payable Increase in income tax payable 45,000 (7,500) (2,750) (1,750) 2,750 18,500 Net cash flow from operating activities $ 198,250 Cash Flows from Investing Activities (450,000) (1,000,000) Purchase of land Purchase of buildings
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