Question

Comparative balance sheets for 2018 and 2017 and a statement of income for 2018 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided.

METAGROBOLIZE INDUSTRIES Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s)
	2018				2017
Assets
Cash	$	390			$	190
Accounts receivable		450				240
Inventory		600				375
Land		600				560
Building		900				900
Less: Accumulated depreciation		(300	)			(285	)
Equipment		2,750				2,450
Less: Accumulated depreciation		(430	)			(400	)
Patent		1,500				1,650
	$	6,460			$	5,680
Liabilities
Accounts payable	$	700			$	550
Accrued expenses payable		200				175
Lease liability—land		130				0
Shareholders' Equity
Common stock		3,110				3,000
Paid-in capital—excess of par		550				485
Retained earnings		1,770				1,470
	$	6,460			$	5,680

METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2018 ($ in 000s)
Revenues
Sales revenue	$	2,765
Gain on sale of land		55		$	2,820
Expenses
Cost of goods sold	$	900
Depreciation expense—building		15
Depreciation expense—equipment		300
Loss on sale of equipment		10
Amortization of patent		150
Operating expenses	$	550			1,925
Net income				$	895

Additional information from the accounting records:

Annual payments of $20,000 on the finance lease liability are paid each January 1, beginning in 2018.

During 2018, equipment with a cost of $300,000 (90% depreciated) was sold.

The statement of shareholders’ equity reveals reductions of $175,000 and $420,000 for stock dividends and cash dividends, respectively.

Required:
Prepare the statement of cash flows for Metagrobolize Industries using the indirect method.

Comparative balance sheets for 2018 and 2017 and a statement of income for 2018 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided.

METAGROBOLIZE INDUSTRIES Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s)
	2018				2017
Assets
Cash	$	390			$	190
Accounts receivable		450				240
Inventory		600				375
Land		600				560
Building		900				900
Less: Accumulated depreciation		(300	)			(285	)
Equipment		2,750				2,450
Less: Accumulated depreciation		(430	)			(400	)
Patent		1,500				1,650
	$	6,460			$	5,680
Liabilities
Accounts payable	$	700			$	550
Accrued expenses payable		200				175
Lease liability—land		130				0
Shareholders' Equity
Common stock		3,110				3,000
Paid-in capital—excess of par		550				485
Retained earnings		1,770				1,470
	$	6,460			$	5,680

METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2018 ($ in 000s)
Revenues
Sales revenue	$	2,765
Gain on sale of land		55		$	2,820
Expenses
Cost of goods sold	$	900
Depreciation expense—building		15
Depreciation expense—equipment		300
Loss on sale of equipment		10
Amortization of patent		150
Operating expenses	$	550			1,925
Net income				$	895

Additional information from the accounting records:

Annual payments of $20,000 on the finance lease liability are paid each January 1, beginning in 2018.

During 2018, equipment with a cost of $300,000 (90% depreciated) was sold.

The statement of shareholders’ equity reveals reductions of $175,000 and $420,000 for stock dividends and cash dividends, respectively.

Required:
Prepare the statement of cash flows for Metagrobolize Industries using the indirect method.

Answer 1

Answer

Cash Flow Statement
	Detail	Net
Cash Flow from Operating Activities
Net Income before taxes		895
Add: Non cash and Non operating Expenses
Depreciation On Building	15
Depreciation On Equipment	300
Loss on Sale of Equipment	10
Amortization of Patent	150
Less: Non cash and Non Operating Incomes
Gain on sale of Equipment	(55)
Working Capital Changes
Increase in Accounts Receivable	(210)
Increase in Inventory	(225)
Increase in Accounts Payable	150
Increase in Accrued Expense payable	25
Cash Flow from Operating Activities (A)		1,055
Cash Flow from Investing Activities
Sale of Equipment	20
Purchases of Equipment	(600)
Sale of Land (130 - 40 + 55)	145
Cash Used in Investing Activities (B)		(435)
Cash Flow from Financing Activities
Dividend Paid	(420)
Cash used in Financing Activities ( C)		(420)
Decrease in Cash (A+B+C)		200
Opening Cash		190
Closing Cash		390

Equipment
Beg. Bal	2,450	Cash	20
		Acc. Depreciation	270
Cash (Purchases)	600	Loss on Sale	10
		Closing Bal.	2,750
Total	3,050	Total	3,050
Acc. Depreciation - Equipment
		Beg. Bal	400
Equipment (Sold) (Bal.)	270	P&L (Current Year)	300
Closing Bal.	430
Total	700	Total	700

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