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 a $1 par val e 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 120,000 shares of common stock for $14 per share. September 10 Repurchase 12,000 shares of its own common stock (i.e., treasury stock) for $17 per share. November 15 Reissue 6,000 shares of treasury stock at $18 per share. December 1 Declare a cash dividend on its common stock of $139,000 ($1 per share) to all stockholders of record on December 15 December 31 Pay the cash dividend declared on December 1. 2. Great Adventures has net income of $144,000 in 2020. Retained earnings at the beginning of 2020 was $134,000. 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.) Answer is not complete. GREAT ADVENTURES, INC Balance Sheet (Stockholders' Equity Section) December 31, 2020 Stockholders' equity Common stock Additional paid-in capital Preferred stock 139,000 39,000 1,560,0003 Total paid-in capital Treasury stock 1,838,000 (102,000) Total stockholders' equity $ 1,736,000 GREAT ADVENTURES, INC. Income Statement For the Year Ended December 31, 2020 Revenues: Service revenue (clinic, racing, TEAM) Sales revenue (MU watches) $541,000 116,000 Total revenues $657,000 Expenses: Cost of goods sold (MU watches) Operating expenses Depreciation expense Interest expense Income tax expense 69,000 304,176 49,000 29,624 56,400 Total expenses 508,200 Net income $148,800 GREAT ADVENTURES, INC. Balance Sheets December 31, 2020 and 2019 Increase () or Decrease (D) 2020 2019 Assets Current assets: 111,618 () 9,500 () 2,950 () 1,950 () Cash Accounts receivable 248,618 43,500 16,850 12,850 137,000 34,000 13,900 10,900 Other current assets Long-term assets 350,000 1,200,000 64,000 (74,000) 350,000 () 1,200,000 () Land Buildings Equipment Less: Accumulated depreciation 0 0 64,000 (25,000) 49,000 () Total assets $1,861,818 234,800 Liabilities and Stockholders' Equity Current liabilities: Accounts payable Interest payable Income tax payable $11,850 740 56,400 $8,900 740 37,500 2,950 () 18,900 (I) 452,368 () Long-term liabilities: Notes payable 481,868 29,500 Stockholders' equity: Common stock Paid-in capital Retained earnings Treasury stock 130,000 1,105,500 152,460 (77,000) 30,000 0 128,160 0 100,000 () 05,500 () 24,300 () (77,000) () Total liabilities and stockholders' equity $1,861,818 $234,800 2. Calculate the following profitability ratios for 2020. (Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Gross profit ratio (on the MU 40.51 01% 1.4.1530 .,. 40.51 1% 0.62times 20.00 > | % a. watches) b. Return on assets C. Profit margin d. Asset turnover e. Return on equity C3
