Decision Time!
Choose one of the following questions:
a. Provide your answer to the question.
b. Provide analytical support for your conclusion.
c. Explain how your analysis led to your conclusion.
OPTION A:
If Tony and Suzie asked you to invest in their business by purchasing stock, how much (if any amount) would you be willing to invest?
OPTION B:
Would you be willing to make an installment loan to Great Adventures in the amount of $50,000? If so, how many years would you allow for repayment?
Great Adventures Continuing Case
Income statement and balance sheet data for Great Adventures, Incorporated, are provided below.
GREAT ADVENTURES, INCORPORATED
Income Statement
For the Year Ended December 31, 2025
Net sales revenues $164,150
Interest revenue $120
Expenses:
Cost of goods sold $38,500
Operating expenses $51,400
Depreciation expense $17,250
Interest expense $6,785
Income tax expense $14,500
Total expenses $128,435
Net income $35,835
GREAT ADVENTURES, INCORPORATED
Balance Sheets
December 31, 2025 and 2024
2025 | 2024
Assets
Current assets:
Cash $180,568 | $64,500
Accounts receivable $47,600 | $0
Inventory $7,000 | $0
Other current assets $900 | $4,500
Long-term assets:
Land $500,000 | $0
Buildings $800,000 | $0
Equipment $62,000 | $40,000
Accumulated depreciation ($25,250) | ($8,000)
Total assets $1,572,818 | $101,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $20,800 | $2,800
Interest payable $750 | $750
Income tax payable $14,500 | $14,000
Other current liabilities $21,000 | $0
Notes payable (current) $48,014 | $0
Notes payable (long-term) $475,869 | $30,000
Stockholders’ equity:
Common stock $120,000 | $20,000
Paid-in capital $904,000 | $0
Retained earnings $57,885 | $33,450
Treasury stock ($90,000) | $0
Total liabilities and stockholders’ equity $1,572,818 | $101,000
As you can tell from the financial statements, 2025 was an especially busy year. Tony and Suzie were able to use the money received from borrowing and the issuance of stock to buy land and begin construction of cabins, dining facilities, ropes course, and the outdoor swimming pool. They even put in a baby pool to celebrate the birth of their first child.