Question

he 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					$	2,540,000
Gain on sale of land						4,000
Total revenues						2,544,000
Expenses:
Cost of goods sold	$	1,620,000
Operating expenses		609,000
Depreciation expense		27,000
Interest expense		28,000
Income tax expense		74,000
Total expenses						2,358,000
Net income					$	186,000

  

VIRTUAL GAMING SYSTEMS Balance Sheets December 31
	2021				2020
Assets
Current assets:
Cash	$	277,260			$	217,920
Accounts receivable		70,600				86,000
Inventory		151,000				139,000
Prepaid rent		4,240				6,480
Long-term assets:
Investments		199,000				110,000
Land		212,000				264,000
Equipment		238,000				214,000
Accumulated depreciation		(134,000	)			(107,000	)
Total assets	$	1,018,100			$	930,400
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	32,000			$	92,000
Interest payable		4,500				3,400
Income tax payable		22,600				26,000
Long-term liabilities:
Notes payable		253,000				229,000
Stockholders' equity:
Common stock		394,000				340,000
Retained earnings		312,000				240,000
Total liabilities and stockholders’ equity	$	1,018,100			$	930,400

  

Additional Information for 2021:

1. Purchase additional investment in stocks for $89,000.

2. Sell land costing $52,000 for $56,000, resulting in a $4,000 gain on sale of land.

3. Purchase $24,000 in equipment by issuing a $24,000 long-term note payable to the seller. No cash is exchanged in the transaction.

4. Declare and pay a cash dividend of $114,000.

5. Issue common stock for $54,000.

  
Required:

Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note. (List cash outflows and any decrease in cash as negative amounts.)

Answer 1

Cashflow Statement:
Cashflows from Operating activities:
Net Income for the year				186000
Adjustment required
Depreciation				27000
Gain on sale of land				-4000
Decrease in Accounts receivable				15400
Increase in Inventory				-12000
Decrease in Prepaid rent				2240
Decrease in Accounts Payable				-60000
Increase in interest payable				1100
Decrease in Tax payable				-3400
Net cash provided from Operating activities					152340
Cashflows from Investing activities:
Investment purchased				-89000
sale of land				56000
Net cash used in investing activities					-33000
Cashflows from Financing activities:
Issue of Sstock				54000
Dividend paid				-114000
Net cahs used in finanncing activitiees					-60000
Net increase in cahs					59340
Beginning balance of cash					217920
Ending balance of cash					277260
Non cash activities:
Investing:
Purchase of equipment through lT notes				24000
Financing:
Issue of LT notes for equipment				24000