Question

Comparative balance sheets for 2016 and 2015 and a statement of income for 2016 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided. METAGROBOLIZE INDUSTRIES

Comparative Balance Sheets December 31, 2016 and 2015 ($ in 000s)

                   2016 2015

Assets

Cash           $ 460    $ 190

Accounts receivable 470    250

Inventory    620                 380

Land              625 575

Building          800                800

Less: Accumulated depreciation (200) (170)

Equipment      2,800 2,510

Less: Accumulated depreciation (451) (420)

Patent             1,600          1,800

                       $ 6,724 $ 5,915

Liabilities

Accounts payable $ 720     $ 470

Accrued expenses payable 210 165

Lease liability—land     150      0

Shareholders' Equity

Common stock 2,650    2,500

Paid-in capital—excess of par    500     470

Retained earnings 2,494      2,310

                               $ 6,724 $ 5,915

METAGROBOLIZE INDUSTRIES

Income Statement For the Year Ended December 31, 2016 ($ in 000s)

Revenues

Sales revenue $ 2,807

Gain on sale of land 60

                                   $ 2,867

Expenses

Cost of goods sold $ 920

Depreciation expense—building 30

Depreciation expense—equipment 328

Loss on sale of equipment 10

Amortization of patent 200

Operating expenses $ 600                     2,088

Net income $ 779

Additional information from the accounting records:

a. During 2016, equipment with a cost of $330,000 (90% depreciated) was sold.

b. The statement of shareholders’ equity reveals reductions of $180,000 and $415,000 for stock dividends and cash dividends, respectively. Required: Prepare the statement of cash flows for Metagrobolize Industries using the indirect method.

Answer 1

	METAGROBOLIZE INDUSTRIES
	Cash flow Statement
	For the year ended December 2016
				$ in 000's
	Cash flows from operating activities
	Net Income			$779
	Adjustments for:
	Depreciation			$358	(30+328)
	Loss on Sale of Equipment			$10
	Amortization of Patent			$200
	Gain On Sale of Land			($60)
	Working capital changes:
	Increase in Accounts Receivable			($220)	(250-470)
	Increase in inventories			($240)	(380-620)
	Increase in Accounts Payable			$250
	Increase in Accrued Expenses			$45
	Cash generated from operations			($165)
	Net cash from operating activities			$1,122
	Cash flows from investing activities
	Proceeds from Sale of Equipment			$23
	Purchase of Equipment (2800-2510+330)			($620)
	Purchase of Land (625-575-60)			$10	50
	Net cash used in investing activities			($587)
	Cash flows from financing activities
	Increase in Lease Liability			$150
	Dividend Paid			($415)
	Net cash used in financing activities			($265)
	Net increase in cash and cash equivalents			270
	Cash and cash equivalents at beginning of period			$190
	Cash and cash equivalents at end of period			460
	Equipment
	Cost	$330,000
	Depreciation 90%	$297,000
	Book Value	$33,000
	Loss on Sale	$10,000
		$23,000