Question

Additional Information for 2022:

1. Land of $700,000 was obtained by issuing a note payable to the seller.
2. Buildings of $860,000 and equipment of $32,600 were purchased using cash.
3. Monthly payments during the year reduced notes payable by $8,563.
4. Issued common stock for $1,200,000.
5. Purchased 12,000 shares of treasury stock for $25 per share.
6. Sold 6,000 shares of treasury stock at $26 per share.
7. Declared and paid a cash dividend of $13,800.
   $185, 370 GRLAI ADVENTURAS, INC. Income Statement For the year ended December 31, 2022 Net revenues: Expenses: Cost of goods sold $39,500 Operating expenses 63,600 Depreciation expense 18,750 Interest expense 9,279 Income tax expense 15,500 Total expenses Net income 146,629 $ 38,741 GREAT ADVENTURES, INC. Balance Sheets December 31, 2022 and 2021 2022 2021 Increase (I) or Decrease (D) $ $ 57,900 $ 0 256,928 49,400 9,000 1,100 199,028 49,400 9,000 4,200 (I) (I) (1) (D) 5,300 Assets Current assets: Cash Accounts receivable Inventory Other current assets Long-term assets: Land Buildings Equipment Accumulated depreciation Total assets 700,000 860,000 82,600 (27,250) $1,931,778 50,000 (8,500) $111,500 700,000 860,000 32,600 18,750 (I) (1) (I) (I) $ $ $ 26,400 (I) Liabilities and Stockholders' Equity Current liabilities: Accounts payable Interest payable Income tax payable Other current liabilities Notes payable (current and long-term) Stockholders' equity: Common stock Paid-in capital Retained earnings Treasury stock Total liabilities and stockholders' equity 29,600 850 15,500 27,000 723,437 3,200 850 14,200 1,300 27,000 691,437 (1) (I) (I) 32,000 20,000 140,000 1,086,000 59,391 (150,000) $1,931,778 34,450 0 $111,500 120,000 (I) 1,086,000 (1) 24,941 (I) (150,000) (I)
   

Required:

Prepare the statement of cash flows for the year ended December 31, 2022, using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)

Answer 1

Solution

GREAT ADVENTURES INC.
Cash Flow Statement
For year ended 31st December 2022
A. Cash Flows from Operating Activity
Net Income	$ 38,741
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense	$ 18,750
Changes in current operating assets and liabilities:
Increase in Accounts receivables	-$ 49,400
Increase in Accounts payable	$ 26,400
Increase in Inventory	-$ 9,000
Decrease in other current assets	$ 4,200
Increase in taxes payable	$ 1,300
Increase in other current liabilities	$ 27,000
Net cash flow from Operating activities		$ 57,991
B. Cash flows from Investing Activities
Purchase of equipment	-$ 32,600
Purchase of Building	-$ 860,000
Net cash flow used for investing activities		-$ 892,600
C. Cash Flows from Financing activities
Cash received from sale of common stock	$ 1,200,000
Cash paid for dividends	-$ 13,800
Purchase of Treasury stock	-$ 300,000
Reissue of Treasury stock	$ 156,000
Repayment of loan	-$ 8,563
Cash flows from Financing activities		$ 1,033,637
Net Increase (Decrease) in Cash [A+B+C]		$ 199,028
Cash at the beginning		$ 57,900
Cash at the end		$ 256,928
Note: Non cash activity
Issue of notes payable in exchange of Building		$ 700,000