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	$	550			$	340
Accounts receivable		690				360
Inventory		840				435
Land		650				600
Building		900				900
Less: Accumulated depreciation		(300	)			(265	)
Equipment		3,350				3,170
Less: Accumulated depreciation		(502	)			(460	)
Patent		1,700				1,950
	$	7,878			$	7,030
Liabilities
Accounts payable	$	940			$	790
Accrued expenses payable		320				255
Lease liability—land		130				0
Shareholders' Equity
Common stock		3,660				3,500
Paid-in capital—excess of par		800				725
Retained earnings		2,028				1,760
	$	7,878			$	7,030

METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2018 ($ in 000s)
Revenues
Sales revenue	$	3,224
Gain on sale of land		75		$	3,299
Expenses
Cost of goods sold	$	1,140
Depreciation expense—building		35
Depreciation expense—equipment		636
Loss on sale of equipment		25
Amortization of patent		250
Operating expenses	$	350			2,436
Net income				$	863

Additional information from the accounting records:

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

b. During 2018, equipment with a cost of $660,000 (90% depreciated) was sold.

c. The statement of shareholders’ equity reveals reductions of $235,000 and $360,000 for stock dividends and cash dividends, respectively.

Answer 1

	($ in 000s)
Metagrobolize Industries
Cash flow Statement (Direct Method)
For the Year Ended Dec 31, 2018
Cash Flow From opearting Activities
Cash recd from Cutomers	2,894
Cash Paid to Suppliers	(1,395)
Cash Paid For Operating Exp.	(285)
Cash Flow from Operating Activities		1,214
Cash flow from Investing Activities
Sale of Equipments	41
Sale of Land	175
Payment of Lease - Land	(20)
Purchase of Equipment	(840)
Cash Flow / (used) from Investing activities		(644)
Cash Flow from Financing Activities
Cash Dividends Paid	(360)
Cash Flow from Financing Activities		(360)
Net Increase / (Decrease) in Cash & Cash Equivalents		210
Cash & Cash equivalent as on Dec 31, 2017		340
Balance as on Dec 31, 2018		550

Calculation of Cash Recd. From Customers
Sales Revenue	3,224
Add: Opening Accounts Receivables	360
Total Due to Customers	3,584
Less: Closing Accounts Receivable	(690)
Cash recd from Customers	2,894
Calculation of cash Paid to Suppliers
Cost of Goods Sold	1,140
Add: Closing Inventory	840
	1,980
Less: opening Inventory	(435)
Purchases made during the year	1,545
Add: Opening Accounts Payable	790
Total amount Due	2,335
Less: Closing Accounts Payable	(940)
Cash payment to Suppliers	1,395
Calculation of Cash paid for Opearting Exp
Operating Exp.	350
Add: Opening Accrued Expenses	255
Total due	605
Less: Closing Accrued liabilities	(320)
Cash paid for Operating Exp.	285

Equipments
To Balance B/f	3170	By Accumulated dep.	594
		By Cash	41
To Cash (Bal. Fig.)	840	By Loss on Sale	25
		By Balance C/f	3350
	4010		4010
Accumulated Dep.
To Plant & Equipments	594	By Balance B/f	460
To Balance C/f	502	By Dep. Exp. (Bal. Fig.)	636
	1096		1096
Land
To Balance B/f	600	By Cash (Bal. Fig.)	175
Profit on sale of land	75
Purchase of Land on lease	150
		By Balance C/f	650
	825		825

Metagrobolize Industries
Cash flow Statement (Indirect Method)
For the Year Ended Dec 31, 2018
Net Income		863
Add/(Less) non cash effects on operating activities
Depreciation expenses
Building	35
Equipment	636
Loss on sale of Equipment	25
Gain on Sale of Land	(75)
Amortization of Patent	250
Increase in Accounts Receivables	(330)
Increase in Inventory	(405)
Increase in Accounts Payables	150
Increase in Accrued Exp.	65	351
Net Cash provided by operating activities		1,214
Cash flow from Investing Activities
Sale of Equipments	41
Sale of Land	175
Payment of Lease - Land	(20)
Purchase of Equipment	(840)
Cash Flow / (used) from Investing activities		(644)
Cash Flow from Financing Activities
Cash Dividends Paid	(360)
Cash Flow from Financing Activities		(360)
Net Increase / (Decrease) in Cash & Cash Equivalents		210
Cash & Cash equivalent as on Dec 31, 2017		340
Balance as on Dec 31, 2018		550