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			$	170
Accounts receivable		370				200
Inventory		520				355
Land		525				500
Building		900				900
Less: Accumulated depreciation		(250	)			(225)
Equipment		2,550				2,210
Less: Accumulated depreciation		(346	)			(320	)
Patent		1,100				1,300
	$	5,759			$	5,090
Liabilities
Accounts payable	$	620			$	470
Accrued expenses payable		160				130
Lease liability—land		130				0
Shareholders' Equity
Common stock		3,120				3,000
Paid-in capital—excess of par		750				715
Retained earnings		979				775
	$	5,759			$	5,090

METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2018 ($ in 000s)
Revenues
Sales revenue	$	2,512
Gain on sale of land		35		$	2,547
Expenses
Cost of goods sold	$	820
Depreciation expense—building		25
Depreciation expense—equipment		188
Loss on sale of equipment		15
Amortization of patent		200
Operating expenses		500			1,748
Net income				$	799

Additional information from the accounting records:

1. Annual payments of $20,000 on the finance lease liability are paid each January 1, beginning in 2018.
2. During 2018, equipment with a cost of $180,000 (90% depreciated) was sold.
3. The statement of shareholders' equity reveals reductions of $155,000 and $440,000 for stock dividends and cash dividends, respectively.

Required:
Prepare the statement of cash flows of Metagrobolize for the year ended December 31, 2018. Present cash flows from operating activities by the direct method. (Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.)

Answer 1

METAGROBOLIZE INDUSTRIES
Statement of Cash Flows
Year Ended December 31, 2018
Cash flows from operating activities:
Cash inflows:
Cash received from customers (1)			2,342
Cash outflows:
Cash paid to suppliers (2)		-835
Cash paid for operating expenses (3)		-470
Total Cash Payments			-1305
Net cash flows from operating activities			1,037
Cash flows from investing activities:
Cash received from sale of equipment (4)		3
Cash paid for purchase of equipment (5)		-520
Cash received from sale of land (6)		160
Net cash flows from investing activities			-357
Cash flows from financing activities:
Cash paid for dividends		-440
Cash paid for lease liability		-20
Net cash flows from financing activities			-460
Net increase in cash			220
Cash balance, January 1, 2018			170
Cash balance, December 31, 2018			390
Working Notes-
1)
Beginning Balance of Receviables	200
Sales revenue	2512
Closing Balance of Receviables	-370
Cash Received from Customers	2,342
2)
Beginning Balance of Inventory	-355
Cost of Good Sold	820
Closing Balance of Inventory	520
Purchases Made ( Cost of Good Sold + Closing Balance of Inventory+ Beginning Balance of Inventory)	985
Beginning Balance of Accounts payable	470
Purchases Made	985
Closing Balance of Accounts payable	-620
Cash to suppliers of goods	835
3)
Beginning Balance of Accrued expenses payable	130
Operating expenses	500
Closing Balance of Accrued expenses payable	-160
Cash Outflow from Operating expenses	470
4)
Cost price of equipment (180 - (180 *90%))	18
Loss on Sale of equipment	-15
Cash Received from Sale of equipment	3
5)
Beginning Balance of Equipment	-2210
Closing Balance of Equipment	2550
Sale of Equipment	180
Purchase of Equipment	520
6)
Beginning Balance of Land	500
Add : Closing Balance of Land - Lease Liability (130+20) (Assets on Finance Lease)	150
Total	650
Less: ending balance	-525
Cost of land sold	125
Gain on Sale of Land	35
	160