Question

Problem 21-5 (Algo) Statement of cash flows; direct method [LO21-3, 21-8]

Comparative balance sheets for 2021 and 2020 and a statement of income for 2021 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided.

METAGROBOLIZE INDUSTRIES Comparative Balance Sheets December 31, 2021 and 2020 ($ in thousands)
		2021			2020
Assets
Cash	$	440			$	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
	$	6,704			$	5,915
Liabilities
Accounts payable	$	720			$	470
Accrued liabilities		210				165
Lease liability—land		130				0
Shareholders' Equity
Common stock		2,650				2,500
Paid-in capital—excess of par		500				470
Retained earnings		2,494				2,310
	$	6,704			$	5,915

METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2021 ($ in thousands)
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:

1. Annual payments of $20,000 on the finance lease liability are paid each January 1, beginning in 2021.
2. During 2021, equipment with a cost of $330,000 (90% depreciated) was sold.
3. 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 of Metagrobolize for the year ended December 31, 2021. Present cash flows from operating activities by the direct method. (Enter your answers in thousands (i.e., 10,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)

Answer 1

METAGROBOLIZE INDUSTRIES
Statement of Cash Flows
For the Year Ended December 31, 2021
	($ in 000s)
Cash Flows from Operating Activities:
Cash inflows:
From customers	2587
Cash outflows:
To suppliers of goods	-910
For operating expenses	-555
Net cash provided by operating activities		1122
Cash Flows from Investing Activities:
Purchase of equipment [$2800 - ($2510 - $330)]	-620
Sale of equipment [($330 x 10%) - $10]	23
Sale of land [($575 + $130) - $625 + $60]	160
Net cash used by investing activities		-437
Cash Flows from Financing Activities
Payment of cash dividends	-415
Payment on lease liability	-20
Net cash used by financing activities		-435
Net increase (decrease) in cash		250
Cash balance, January 1		190
Cash balance, December 31		440
Noncash investing and financing activities:
Acquired land		150

Kindly fill as required since no format/template has been provided with the question posted.

Working:

Sales revenue	2807
Less: Increase in Accounts receivable (470 - 250)	220
Cash received from customers	2587
Cost of goods sold	920
Add: Increase in Inventory (620 - 380)	240
Less: Increase in Accounts payable (720 - 470)	250
Cash paid to suppliers of goods	910
Operating expenses	600
Less: Increase in Accrued liabilities (210 - 165)	45
Cash paid for operating expenses	555