The income statement, balance sheets, and additional information for Great Adven

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 31, 2020 Revenues: Service revenue (clinic, racing, TEAM) $ 549,000 Sales revenue (MU watches) 124,000 Total revenues $ 673,000 Expenses: Cost of goods sold (watches) 73,000 Operating expenses 304,576 Depreciation expense 53,000 Interest expense 30,024 Income tax expense 58,800 Total expenses 519,400 Net income $ 153,600 GREAT ADVENTURES, INC. Balance Sheets December 31, 2020 and 2019 2020 2019 Increase (I) or Decrease (D) Assets Current assets: Cash $ 295,570 $ 141,000 $ 154,570 (I) Accounts receivable 49,500 38,000 11,500 (I) Inventory 17,450 14,300 3,150 (I) Other current assets 13,450 11,300 2,150 (I) Long-term assets: Land 550,000 0 550,000 (I) Buildings 1,000,000 0 1,000,000 (I) Equipment 68,000 68,000 Accumulated depreciation (79,000) (26,000) 53,000 (I) Total assets $ 1,914,970 $ 246,600 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 12,450 $ 9,300 $ 3,150 (I) Interest payable 780 780 Income tax payable 58,800 39,500 19,300 (I) Long-term liabilities: Notes payable 523,820 31,500 492,320 (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 184,120 145,520 38,600 (I) Treasury stock (90,000) 0 (90,000) (I) Total liabilities and stockholders’ equity $ 1,914,970 $ 246,600 Additional Information for 2020: 1. Borrowed $530,000 in January 2020. Made 12 monthly payments during the year, reducing the balance of the loan by $37,680. 2. Issued common stock for $1,200,000. 3. Purchased 10,000 shares of treasury stock for $18 per share. 4. Reissued 5,000 shares of treasury stock at $19 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.)

Explanation / Answer

Particulars Amount Income before tax               212,400 Add: Interest                  30,024 Add: Depreciation                  53,000 Cash flow before working capital changes:               295,424 (Increase)/Decrease in receivables               (11,500) (Increase)/Decrease in inventory                  (3,150) (Increase)/Decrease in other current assets                  (2,150) Increase/(Decrease) in payables                    3,150 operating Cash flow before taxes               281,774 Less: Taxes paid               (39,500) Net cash from/(used in) operating activities               242,274 Cash flow from investing activities: Purchase of land             (550,000) Purchase of buildings         (1,000,000) Net cash from/(used in) investing activities         (1,550,000) Cash flow from financing activities: Interest paid               (30,024) Loan borrowed               530,000 Loan repayments               (37,680) common stock issue            1,200,000 Treasury stock purchase             (180,000) Treasury stock sale                  95,000 Dividend paid             (115,000) Net cash from/(used in) financing activities            1,462,296 Net change in cash               154,570 Add: Opening cash balance               141,000 Closing cash balance               295,570

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