Chapter 11, Problem 11.4BP

Preparing statement of cash flows–indirect method (LO11–2, 11–3)

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, 2018
Net sales			$2,600,000
Gain on sale of land			7,000
Total revenues Expenses:			2,607,000
Cost of goods sold	$1,650,000
Operating expenses	615,000
Depreciation expense	33,000
Interest expense	34,000
Income tax expense	80,000
Total expenses			2,412,000
Net income			$ 195,000
VIRTUAL GAMING SYSTEMS Balance Sheets December 31
		2018			2017
Assets Current assets:
Cash		$ 409,500			$ 343,800
Accounts receivable		64,000			80,000
Inventory		160,000			145,000
Prepaid rent		4,600			7,200
Long-term assets:
Investments		205,000			110,000
Land		215,000			270,000
Equipment		250,000			220,000
Accumulated depreciation		(143,000)			(110,000)
Total assets		$1,165,100			$1,066,000
Liabilities and Stockholders’ Equity Current liabilities:
Accounts payable		$ 35,000			$ 98,000
Interest payable		5,100			4,000
Income tax payable		25,000			29,000
Long-term liabilities:
Notes payable		265,000			235,000
Stockholders’ equity:
Common stock		460,000			400,000
Retained earnings		375,000			300,000
Total liabilities and stockholders’ equity		$1,165,100			$1,066,000

Additional Information for 2018:

  1.    Purchase additional investment in stocks for $95,000.

  2.    Sell land costing $55,000 for $62,000, resulting in a $7,000 gain on sale of land.

  3.    Purchase $30,000 in equipment by borrowing $30,000 with a note payable due in three years. No cash is exchanged in the transaction.

  4.    Declare and pay a cash dividend of $120,000.

  5.    Issue common stock for $60,000.

Required:

Prepare the statement of cash flows using the indirect method. Disclose any noncash transactions in an accompanying note.