The income statement, balance sheet, and additional information for Great Advent

Question

The income statement, balance sheet, and additional information for Great Adventures, Inc., are provided below. GREAT ADVENTURES, INC. Income Statement For the Year Ended December 31, 2017

Revenues: Service revenue (clinic, racing, TEAM) $ 559,000 Sales revenue (MU watches) 134,000 Total revenues $ 693,000

Expenses: Cost of goods sold (watches) 78,000 Operating expenses 305,076 Depreciation expense 58,000 Interest expense 30,524 Income tax expense 61,800 Total expenses 533,400

Net income $ 159,600

GREAT ADVENTURES, INC. Balance Sheet December 31, 2017 and 2016 2017 2016 Increase (I) or Decrease (D)

Assets

Current assets: Cash $ 302,260 $ 146,000 $ 156,260 (I) Accounts receivable 57,000 43,000 14,000 (I) Inventory 18,200 14,800 3,400 (I) Other current assets 14,200 11,800 2,400 (I)

Long-term assets: Land 400,000 0 400,000 (I) Buildings 1,200,000 0 1,200,000 (I) Equipment 73,000 73,000 Accumulated depreciation (85,250) (27,250) 58,000 (I)

Total assets $ 1,979,410 $ 261,350

Liabilities and Stockholders' Equity

Current liabilities: Accounts payable $ 13,200 $ 9,800 $ 3,400 (I) Interest payable 830 830 Income tax payable 61,800 42,000 19,800 (I)

Long-term liabilities: Notes payable 576,260 34,000 542,260 (I)

Stockholders' Equity: Common stock 130,000 30,000 100,000 (I) Paid-in capital 1,105,500 0 1,105,500 (I) Retained earnings 179,820 144,720 35,100 (I) Treasury stock (88,000) 0 (88,000) (I)

Total liabilities and stockholders’ equity $1,979,410 $261,350

Additional Information for 2017:

1. Borrowed $580,000 in January 2017. Made 12 monthly payments during the year, reducing the balance of the loan by $37,740.

2. Issued common stock for $1,200,000.

3. Purchased 11,000 shares of treasury stock for $16 per share.

4. Reissued 5,500 shares of treasury stock at $17 per share. 5. Declared and paid a cash dividend of $124,500. Required: Prepare the statement of cash flows for the year ended December 31, 2017, using the indirect method. (List cash outflows as negative amounts.)

Prepare the statement of cash flows for the year ended December 31, 2017, using the indirect method.

Explanation / Answer

Great Adventures Inc Partial Statement of Cash Flows (Indirect Method) For the Year ended Dec 31, 2017 Cash Flow from opearating activities: Net Income          159,600 Add/(Less) non cash effects on operating activities Depreciation            58,000 Increase in Accounts Receivables          (14,000) Increase in Inventory            (3,400) Increase in Other Current Assets            (2,400) Increase in Accounts Payables              3,400 Increase in Income Tax Payable            19,800            61,400 Net Cash provided by operating activities          221,000 Cash flow from Investing Activities Purchase of Building    (1,200,000) Purchase of Land       (400,000) Cash Flow / (used) from Investing activities    (1,600,000) Cash Flow from Financing Activities Borrowed Loan on Notes Payable          580,000 Repayment of Loan - Notes Payable          (37,740) Purchase of Treasury Shares (11000 Shares X $16)       (176,000) Reissue of Treasury Shares (5500 Shares x $17)            93,500 Receipts from Isssue of Common Stock      1,200,000 Cash dividend paid       (124,500) Cash Flow from Financing Activities      1,535,260 Net Increase / (Decrease) in Cash          156,260 Cash balance as on Dec 31, 2016          146,000 Cash balance as on Dec 31, 2017          302,260

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