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 $ 580 $ 375
Accounts receivable 600 450
Inventory 900 525
Land 675 600
Building 900 900
Less: Accumulated depreciation (300 ) (270 )
Equipment 2,850 2,250
Less: Accumulated depreciation (525 ) (480 )
Patent 1,200 1,500
$ 6,880 $ 5,850
Liabilities
Accounts payable $ 750 $ 450
Accrued expenses payable 300 225
Lease liability—land 130 0
Shareholders' Equity
Common stock 3,150 3,000
Paid-in capital—excess of par 750 675
Retained earnings 1,800 1,500
$ 6,880 $ 5,850

METAGROBOLIZE INDUSTRIES
Income Statement
For the Year Ended December 31, 2018
($ in 000s)
Revenues
Sales revenue $ 2,645
Gain on sale of land 90 $ 2,735
Expenses
Cost of goods sold $ 600
Depreciation expense—building 30
Depreciation expense—equipment 315
Loss on sale of equipment 15
Amortization of patent 300
Operating expenses $ 500 1,760
Net income $ 975

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 $225,000 and $450,000 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.

Answer 1

Metagrobolize Industries
Statement of Cash Flows
Year Ended December 31, 2018
Cash flows from operating activities:
Cash inflows:
From customers			$   2,495.00
Cash outflows:
To suppliers of goods		$ (675.00)
To employees (operating expenses)		$ (425.00)
Total Cash Payments			$ (1,100.00)
Net cash flows from operating activities			$   1,395.00
Cash flows from investing activities:
Purchase of equipment		$ (900.00)
Sale of land		$   145.00
Sale of equipment		$      15.00	$     (740.00)
Net cash flows from investing activities
Cash flows from financing activities:
Payment of cash dividends		$ (450.00)
Net cash flows from financing activities			$     (450.00)
Net increase in cash			$       205.00
Cash balance, January 1, 2018			$       375.00
Cash balance, December 31, 2018			$       580.00

Working Notes-

1)

Sales revenue	$ 2,645.00
Difference in Account Receivable for both Period	$     150.00
Cash Received from Customers	$ 2,795.00

2)

Cost of goods sold	$     600.00
Difference in Inventory for both Period	$     375.00
Difference in Account Payable for both Period	$   (300.00)
Cash to suppliers of goods	$     675.00

3)

Operating expenses	$     500.00
Difference in Accrued Expense for both Period	$     (75.00)
Operating expenses	$     425.00

4)

Sale price of equipment	$     300.00
Difference in Equipment for both Period	$     600.00
Purchase of equipment	$     900.00

5)

Difference in Land for both Period (600+130-675)	$        55.00
Gain On Sale	$        90.00
Sale of Land	$     145.00