Question

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

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	$	400			$	205
Accounts receivable		390				210
Inventory		540				360
Land		550				515
Building		900				900
Less: Accumulated depreciation		(300	)			(270)
Equipment		2,600				2,270
Less: Accumulated depreciation		(367	)			(340	)
Patent		1,200				1,450
	$	5,913			$	5,300
Liabilities
Accounts payable	$	640			$	390
Accrued expenses payable		170				130
Lease liability—land		130				0
Shareholders' Equity
Common stock		3,140				3,000
Paid-in capital—excess of par		750				730
Retained earnings		1,083				1,050
	$	5,913			$	5,300

METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2018 ($ in 000s)
Revenues
Sales revenue	$	2,489
Gain on sale of land		40		$	2,529
Expenses
Cost of goods sold	$	840
Depreciation expense—building		30
Depreciation expense—equipment		216
Loss on sale of equipment		15
Amortization of patent		250
Operating expenses		550			1,901
Net income				$	628

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 $210,000 (90% depreciated) was sold.

The statement of shareholders' equity reveals reductions of $160,000 and $435,000 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. (Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.)

METAGROBOLIZE INDUSTRIES

Statement of Cash Flows

For year ended December 31, 2018

($ in 000s)

Cash inflows:

Cash outflows:

Noncash investing

and financing activities:

Answer 1

		(in $ 000)
METAGROBOLIZE INDUSTRIES
Statement of Cash flow (Direct Method)
Year Ended December 31,2018
Cash flow from Operating activities
Cash received from Customers	$2,309.00
Cash paid to suppliers	-$770.00
Cash paid for expenses	-$510.00
Net Cash used for Operating Activities		$1,029.00
Cash flow from Investing activities
Sale of equipment	$6.00
Purchase of equipment	-$540.00
Sale of land	$155.00
Net Cash used for investing Activities		-$379.00
Cash flow from Financing activities
Payment of lease liability	-$20.00
Issue of new shares of stock
Dividend paid	-$435.00
Net Cash available from financing activities		-$455.00
Net Cash Surplus		$195.00
Add : Cash balance 01/01/2017		$205.00
Cash balance 2016		$400.00
Working
Sale value of equipment
Book value of equipment (10% of $210000)	$21,000.00
Less : Loss on sale	$15,000.00
Sale value of equipment	$6,000.00
Sale Value of land
Land value as on 31/12/2017	$515,000.00
Add : Land purchased on lease	$150,000.00
Less : Land value on 31/12/2018	$550,000.00
Cost of land sold	$115,000.00
Add : Gain on sale of land	$40,000.00
Sale Value of land	$155,000.00
Cash received from customers
Accounts receivable as on 1.1.18	$210,000.00
Add : Sales	$2,489,000.00
Less : Accounts Receivable as on 31.12.18	$390,000.00
Cash received from customers	$2,309,000.00
Cash paid to suppliers
Accounts Payable as on 1.1.18	$390,000.00
Add : Cost of goods sold	$840,000.00
Less : Payable as on 31.12.18	$640,000.00
Add : Increase in Inventory	$180,000.00
Cash paid to suppliers	$770,000.00
Cash paid for expenses
Accrued expense payable as on 1.1.18	$130,000.00
Add: Operating expenses for 2018	$550,000.00
Less : Accrued expense paayble as on 31.12.18	$170,000.00
Cash paid for expenses	$510,000.00