The 2021 income statement and the 2021 comparative balance sheet of Ghent River Camp, Inc., have just been distributed at a meeting of the camp’s board of directors. The directors raise a fundamental question: Why is the cash balance so low? This question is especially troublesome since 2021 showed record profits. As the controller of the company, you must answer the question. 

Requirements

1. Prepare a statement of cash flows for 2021 in the format that best shows the relationship between net income and operating cash flow. The company sold no plant assets or longterm investments and issued no notes payable during 2021. There were no noncash investing and financing transactions during the year. Show all amounts in thousands.

2. Answer the board members’ question: Why is the cash balance so low? Point out the two largest cash payments during 2021. 

3. Considering net income and the company’s cash flows during 2021, was it a good year or a bad year? Give your reasons.

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A1 1 2 3 Revenues: 4 5 6 7 8 9 10 (In thousands) <> Sales revenue Expenses: Cost of goods sold Salary expense Depreciation expense Interest expense Amortization expense Total expenses 11 12 Net income 13 Ghent River Camp, Inc. Income Statement Year Ended December 31, 2021 $ 436 221 48 46 13 11 339 $ 97