The income statement balance sheets and additional informati

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 Gain on sale of land S 2,600,000 7,000 Total revenues 2,607,000 Expenses Cost of goods sold Operating expenses Depreciation expense Interest expense Income tax expense S 1,650,000 615,000 33.000 34.000 80,000 Total expenses 2,412,000 Net income S 195,000 VIRTUAL GAMING SYSTEMS Balance Sheets December 31 2018 2017 Assets Current assets Cash Accounts receivable Inventory Prepaid rent S 409,500 S 343,800 80,000 145,000 7,200 64.000 160,000 4.600 Long-term assets Investments Land Equipment Accumulated depreciation 110,000 270,000 220.000 143,000) (110,000) 205,000 215,000 250,000 Total assets S 1,165,100 S 1,066,000 Liabilities and Stockholders\' Equity Current liabilities Accounts payable Interest payable Income tax payable S 35,000 S 98,000 4,000 29,000 5,100 25,000 265,000 460,000 Long-term liabilities: Notes payable 235,000 Stockholders\' equity Common stock Retained earnings 400,000 300,000 375,000 Total liabilities and stockholders\' equity S 1,165,100 S 1,066,000

Solution

Virtual Gaming Systems Cash flow from operating activities Net income 195,000 Adjusments to reconcile net income to net cash flows from operating activities Depreciation expense 33,000 Gain (on sale of land) -7000 Decrease in accounts payable -63000 Increase in Inventory -15000 Decrease in prepaid rent 2600 Decrease in accounts receivable 16000 increase in interest payable 1100 Decrease in income tax payable -4,000 158,700 Net cash flows from operating activities 158,700 Cash flow from Investing Activities Sale of land 62,000 purchase investment in stock -95,000 Net cash flows from investing activities -33,000 Net cash flows from financing activities payment of cash dividends -120,000 issue common stock 60,000 Net cash flows from financing activities -60,000 Net increase in cash 65,700 Cash at the beginning of the period 343,800 Cash at the end of period 409,500 Note:Noncash Activities purchase equipment using a note payable 30,000