The income statement for the year ended December 31, 20X1, as well as the balance sheets as of December 31, 20X1, and December 31, 20X0, for Lucky Lady Inc. follow. This information is taken from the financial statements of a real company whose name has been disguised.

Income Statement
($ in thousands)
Revenues
Casino	$ 26,702
Rooms	2,897
Food and beverage	2,351
Other hotel/casino	5,066
Airline	20,784
Total revenues	57,800
Operating Expenses
Casino	9,341
Rooms	1,016
Food and beverage	2,529
Other hotel/casino	5,777
Airline	20,599
Selling, general, and administrative (including bad debt expense of $3,855)	19,679
Depreciation expense	8,018
Hotel preopening expenses	45,130
Aircraft carrying value adjustment	68,948
Total operating expenses	181,037
Operating income	(123,237)
Nonoperating items:
Interest income	12,231
Interest expense	(6,596)
Other, net	16
Income before taxes	(117,586)
Provision for income taxes	–0–
Net income (loss)	$ (117,586)

Additional Information and Author Notes:

• Aircraft valuation adjustment: The company reduced the book value of its aircraft and related equipment to their expected recoverable values and recognized an aircraft carrying value adjustment in the 20X1 income statement. [Author Note: You may treat this item as “extra” depreciation recorded during the year due to abnormal decline in the asset value.] 

• Property, plant, and equipment: Includes land, buildings, aircraft equipment, furniture and fixtures, equipment under capital lease, and so on. During 20X1, the company acquired equipment under capital leases for $16,987,000. The company also sold equipment with a net book value of $2,501,000 for $684,000 cash. [Author Note: The gain or loss on this sale is combined with some other item in the income statement. Any other change in the gross book value of Property, plant, and equipment may be attributed to outright purchase of other equipment and building construction costs.]

• Finance lease and long-term liabilities: [Author Note: When preparing the cash flow statement, you may find it convenient to combine the current and long-term portions of each of these liabilities.]

• Pre-opening expenses: Pre-opening expenses include direct project salaries, advertising, and other pre-opening services incurred during the pre-opening period of the Lucky Lady Hotel. Such expenses were expensed upon opening the facility.

• Stock offering: The increases in Common stock and Capital in excess of par accounts are due to a common stock offering completed on August 17, 20X1.

• Laundry loan: On June 16, 20X1, the company obtained a $10,000,000 loan from a financial institution for a laundry facility in North Las Vegas, Nevada. As of December 31, 20X1, $10,000,000 has been drawn down under the loan. Construction of the facility was completed in December 20X1. The laundry provides the laundry and dry cleaning services for the Lucky Lady Hotel.

Required:

Using the indirect method, prepare the statement of cash flows for the year ended December 31, 20X1, in as much detail as possible. For example, borrowing and repayment, if any, should be shown separately as financing inflow and outflow, respectively. Similarly, to the extent that information is available, separately disclose and explain the changes to each asset and each liability account that affected Lucky Lady’s cash flows during 20X1.

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Balance Sheets December 31, ($ in thousands) 20X1 20X0 Assets $ 211,305 35,249 (4,733) 11,755 12,662 Cash $ 579,963 Gross accounts receivable 2,178 (1,531) 1,219 Less: Allowance for doubtful accounts Prepaid expenses Inventories 154 266,238 953,796 (86,512) -0- 581,983 471,506 (21,796) 10,677 21,116 Total current assets Gross property, plant, and equipment Less: Accumulated depreciation Pre-opening expenses Other operating assets 26,601 Total assets $1,160,123 $1.063.486 Liabilities and Stockholders' Equity Accounts payable Accrued salaries and wages Accrued interest on long-term debt Other accrued liabilities $ 14,181 8,194 $ 4,322 945 9,472 9,429 9,744 33,502 Construction payables Current maturities, finance leases 96,844 1,830 1,573 32,296 289 Current maturities, long-term debt Total current liabilities -0- 165,596 57,025 Deferred revenues 10,784 -0- Deferred income taxes 6,517 14,044 6,517 Long-term obligation, finance leases Long-term debt 162 481,427 473,000 678,368 536,704 485 Total liabilities 506 662,365 Common stock Capital in excess of par value Common stock in treasury 589,827 Retained earnings (deficit) Total stockholders' equity Total liabilities and equity (29,490) (151,626) 481,755 $1,160,123 (29,490) (34,040) 526,782 $1,063,486