The income statement, balance sheet, and additional information for Virtual Gami

Question

The income statement, balance sheet, and additional information for Virtual Gaming Systems are provided.

   

  

  

Purchase $14,000 in equipment by borrowing $14,000 with a note payable due in three years. No cash is exchanged in the transaction.

  

Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note.

VIRTUAL GAMING SYSTEMS
Income Statement
For the Year Ended December 31, 2015   Net sales $ 2,440,000   Gain on sale of land 9,000           Total revenues 2,449,000   Expenses:        Cost of goods sold $ 1,570,000          Operating expenses 599,000          Depreciation expense 17,000          Interest expense 18,000        Income tax expense 64,000           Total expenses 2,268,000   Net income $ 181,000

Explanation / Answer

Cash flow Statement

Cash from Operation Net income 181000 Less: Gain on sale of land (9000) Add: depreciation 17000 Change in Accounts receivable 14400 Change in inventory (7000) Change in prepaid 1640 Change in accounts payable (55000) Change in interest payable 1200 Change in tax payable (2400) Net cash flow from operations 141840 Cash From Investing Sale of land 56000 Purchase of investment (79000) Net cash from Investing (23000) Cash From Financing Issue of stock 44000 Dividend Paid (104000) Net cash from Financing (60000) Net change in cash 58840 Add: Opening cash 55720 Closing cash balance 114560

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