Tony and Suzie purchased land costing $500,000 for a new camp in January 2020. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow another million dollars, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and sell shares of stock in the company to raise the additional funds for the camp. Great Adventures has two classes of stock authorized: 9%, $10 par preferred, and $1 par value common.

When the company began on July 1, 2018, Tony and Suzie each purchased 12,500 shares of $1 par value common stock at $1 per share. The following transactions affect stockholders equity during 2020, its third year of operations:

July 2 Issue an additional 110,000 shares of common stock for $9 per share.

September 10 Repurchase 11,000 shares of its own common stock (i.e., treasury stock) for $12 per share.

November 15 Reissue 5,500 shares of treasury stock at $13 per share.

December 1 Declare a cash dividend on its common stock of $129,500 ($1 per share) to all stockholders of record on December 15.

December 31 Pay the cash dividend declared on December 1.

References

1.

Required information

Required:

1. Record each of these transactions.

References

Previous attempt

Required information

2. Great Adventures has net income of $147,000 in 2020. Retained earnings at the beginning of 2020 was $137,000. Prepare the stockholders equity section of the balance sheet for Great Adventures as of December 31, 2020. (Amounts to be deducted should be indicated with a minus sign.)

Income statement and balance sheet data 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)	$537,000
Sales revenue (MU watches)	112,000
Total revenues		$649,000
Expenses:
Cost of goods sold (MU watches)	67,000
Operating expenses	303,976
Depreciation expense	47,000
Interest expense	29,424
Income tax expense	55,200
Total expenses		502,600
Net income		$146,400

GREAT ADVENTURES, INC. Balance Sheets December 31, 2020 and 2019
		2020			2019	Increase (I) or Decrease (D)
Assets
Current assets:
Cash	$	289,142		$	135,000	154,142	(I)
Accounts receivable		40,500			32,000	8,500	(I)
Inventory		16,550			13,700	2,850	(I)
Other current assets		12,550			10,700	1,850	(I)
Long-term assets:
Land		400,000			0	400,000	(I)
Buildings		1,100,000			0	1,100,000	(I)
Equipment		62,000			62,000
Less: Accumulated depreciation		(71,500)			(24,500)	47,000	(I)
Total assets	$	1,849,242		$	228,900
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$11,550			$8,700	2,850	(I)
Interest payable		720			720
Income tax payable		55,200			36,500	18,700	(I)
Long-term liabilities:
Notes payable		460,892			28,500	432,392	(I)
Stockholders' equity:
Common stock		125,000			25,000	100,000	(I)
Paid-in capital		1,105,500			0	1,105,500	(I)
Retained earnings		156,380			129,480	26,900	(I)
Treasury stock		(66,000)			0	(66,000)	(I)
Total liabilities and stockholders' equity	$	1,849,242		$	228,900

As you can tell from the financial statements, 2020 was an especially busy year. Tony and Suzie were able to use the $1.2 million received from the issuance of 100,000 shares of stock to hire a construction company for $1 million to build the cabins, dining facilities, ropes course, and the outdoor swimming pool. They even put in a baby pool to celebrate the birth of their firstborn son, little Venture Matheson. Assume all sales and services are on credit.

Required:

1. Calculate the following risk ratios for 2020.

2. Calculate the following profitability ratios for 2020?

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 indirect method. (List cash outflows as negative amounts.)