Question

Problem 11-7B Calculate operating activities-direct method

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

Problem 11-7B Calculate operating activities-direct method (LO11-4, 11-5, 11-7) The income statement, balance sheets, and additional information for Virtual Gaming Systems are provided. VIRTUAL GAMING SYSTEMS Income Statement For the Year Ended December 31, 2021 Net sales $2,400,000 Gain on sale of land 9,000 Total revenues 2,409,000 Expenses: Cost of goods sold $1,550,000 Operating expenses 595,000 Depreciation expense 13,000 Interest expense 14,000 60,000 Income tax expense Total expenses 2,232,000 Net income $ 177,000

Answer 1

Workings: VIRTUAL GAMING SYSTEMS Statement of Cash Flows For the Year Ended December 31, 2021 Cash Flows from Operating Activities: Cash inflows: Cash collections from customers $2,414,000 Cash Outflows: Inventory $1,608,000 Operating Expenses $593,600 Interest expense $12,900 Income taxes $62,000 Net cash flow from operating activities Accounts receivable, beg. bal. Add: Sales revenue for the year Less: Accounts receivable, end. bal. Cash received on account $80,000 $2,400,000 $66,000 $2,414,000 $137,500 Cost of Goods Sold Add: Ending Inventory Less: Beginning Inventory Goods Purchased Accounts payable, beg. Bal. Less: Accounts payable, end. Bal. Cash paid to Suppliers for Inventory $1,550,000 $130,000 $125,000 $1,555,000 $78,000 $25,000 $1,608,000 Cash Flow from Investing Activities: Cash realized from sale of land Cash paid to purchase investments Net Cash Flow from Investing Activities $54,000 $75,000 $21,000

Interest payable, Beg. Balance Interest expense Less: Interest payable, End. Balance Interest expenses paid $2,000 $14,000 -$3,100 $12,900 Cash Flow from Financing Activities: Cash from common stocks issued $40,000 Dividends paid during the year $100,000 Net Cash Flow from Financing Activities Net Increase in cash balance during the year Cash at the beginning of the period Cash at the end of the period Note: Noncash Activities Long-term note issued for purchasing equipment $60,000 $56,500 $50,800 $107,300 Operating expenses Add: Prepaid rent, End. Balance Less: Prepaid rent, Beg. Balance Operating expenses paid $595,000 $2,800 $4,200 $593,600 $10,000 Workings continued.... Income taxes payable, Beg. Balance Income tax expense Less: Income taxes, End. Balance Income tax expenses paid $34,000 $60,000 $32,000 $62,000