Question

The income statement, balance sheets, and additional information for Virtual Gaming Systems are provided. $2,430,000 6,500 2,436,500 VIRTUAL GAMING SYSTEMS Income Statement For the year ended December 31, 2021 Net sales Gain on sale of land Total revenues Expenses: Cost of goods sold $1,565,000 Operating expenses 598,000 Depreciation expense 16,000 Interest expense 17,000 Income tax expense 63,000 Total expenses Net income 2,259,000 $ 177,500 VIRTUAL GAMING SYSTEMS Balance Sheets December 31 2021 2020 $ $ 81,420 68,700 134,500 2,980 25,740 83,000 128,000 4,560 Assets Current assets: Cash Accounts receivable Inventory Prepaid rent Long-term assets: Investments Land Equipment Accumulated depreciation Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Interest payable Income tax payable Long-term liabilities: Notes payable Stockholders' equity: Common stock Retained earnings Total liabilities and stockholders' equity 198,000 208,500 216,000 (117,500) $ 792,600 120,000 255,000 203,000 (101,500) $ 717,800 $ $ 26,500 3,400 30,200 81,000 2,300 32,500 255,000 242,000 273,000 204,500 $ 792,600 230,000 130,000 $ 717,800

Answer 1

Cash folw statement is prepared under Indirect method

VIRTUAL GA $ 177,500 VIRTUAL GAMING SYSTEMS Statement of Cash Flows For the Year Ended December 31, 2021 Cash Flows from Operating Activities Net income Adjustments to reconcile net income to net cash flows from operating activities: Depreciation expense Gain (on sale of land) Decrease in accounts receivable Increase in inventory Decrease in prepaid rent Decrease in accounts payable Increase in interest payable Decrease in income tax payable 16,000 (6,500) 14,300 (6,500) 1,580 (54,500) 1,100 (2,300) $ 140,680 Net cash flows from operating activities Cash Flows from Investing Activities Purchase investment in stock Proceeds from sale of land (78,000) 53,000 $ 25,000 Net cash flows from investing activities Cash Flows from Financing Activities Issue common stock Payment of cash dividends 43,000 (103,000 Net cash flows from financing activities Net decrease in cash Cash at the beginning of the period Cash at the end of the period Note: Noncash Activities 1. Depreciation 2. Purchase of equipment in exchange of notes payable $ (60,000) $ 55,680 $ 25,740 $ 81,420