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 $ 470 $ 160

Accounts receivable 490 260

Inventory 640 385

Land 650 590

Building 800 800

Less: Accumulated depreciation (250) (230)

Equipment 2,850 2,570

Less: Accumulated depreciation (472) (440)

Patent 1,700 1,950 $ 6,878 $ 6,045

Liabilities

Accounts payable $ 740 $ 440

Accrued expenses payable 220 155

Lease liability—land 150 0

Shareholders' Equity

Common stock 2,600 2,500

Paid-in capital—excess of par 600 515

Retained earnings 2,568 2,435

$ 6,878 $ 6,045

METAGROBOLIZE INDUSTRIES

Income Statement

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

Revenues

Sales revenue $ 2,839

Gain on sale of land $ 65

$ 2,904

Expenses

Cost of goods sold $ 940

Depreciation expense—building 20

Depreciation expense—equipment 356

Loss on sale of equipment 10

Amortization of patent 250

Operating expenses $ 600

2,176

Net income $ 728

Additional information from the accounting records:
a.	During 2016, equipment with a cost of $360,000 (90% depreciated) was sold.
b.	The statement of shareholders’ equity reveals reductions of $185,000 and $410,000 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
Statement of Cash Flows
For the Year Ended December 31, 2016
	($ in 000s)
Cash Flows from Operating Activities:
Net income		728
Adjustments to reconcile net income to net cash provided by operations:
Depreciation expense (20 + 356)	376
Loss on sale of equipment	10
Amortization of patent	250
Gain on sale of land	-65
Increase in Accounts receivable	-230
Increase in Inventory	-255
Increase in Accounts payable	300
Increase in Accrued expenses payable	65	451
Net cash provided by operating activities		1179
Cash Flows from Investing Activities:
Sale proceeds from equipment	26
Purchase of equipment	-640
Sale of land	155
Net cash provided from investing activities		-459
Cash Flows from Financing Activities
Payment of cash dividends	-410
Net cash provided by financing activities		-410
Net increase (decrease) in cash		310
Cash balance, December 31, 2015		160
Cash balance, December 31, 2016		470