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	$	570			$	400
Accounts receivable		730				380
Inventory		880				445
Land		750				685
Building		900				900
Less: Accumulated depreciation		(250	)			(235	)
Equipment		3,450				3,290
Less: Accumulated depreciation		(364	)			(320	)
Patent		1,900				2,000
	$	8,566			$	7,545
Liabilities
Accounts payable	$	980			$	680
Accrued expenses payable		340				265
Lease liability—land		130				0
Shareholders' Equity
Common stock		3,700				3,500
Paid-in capital—excess of par		800				755
Retained earnings		2,616				2,345
	$	8,566			$	7,545

METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2018 ($ in 000s)
Revenues
Sales revenue	$	3,143
Gain on sale of land		85		$	3,228
Expenses
Cost of goods sold	$	1,180
Depreciation expense—building		15
Depreciation expense—equipment		692
Loss on sale of equipment		25
Amortization of patent		100
Operating expenses	$	350			2,362
Net income				$	866

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 $720,000 (90% depreciated) was sold.

C. The statement of shareholders’ equity reveals reductions of $245,000 and $350,000 for stock dividends and cash dividends, respectively.

Required:
Prepare the statement of cash flows for Metagrobolize Industries using the indirect 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
Cash flow statement (Indirect method)
Cash flow from operating activity
Cash Flow from Operating Activities
Net income		866
Adjustment to reconcile net income
Depreciation (692+15)	707
Loss on sale of equipment	25
Amortization of patent	100
increase in AR	-350
increase in Inventory	-435
increase in AP	300
increse in Accrued Expanses	75
		422
		1288
Investing Activities
Purchase of Equipment	-880
Sale of Land (685+130-750)	65
Sale of Equipment (720*90%)-25	47
Net Cash Flows		-768
Finance Activities
Payment of Cash Dividends	-350
Net Cash Flow		-350
Net Increase in Cash		170
Cash Balance, January 1,2017		400
Cash Balance, December 31,2017		570
Non-Cash Investing and Finance
Land aquired by lease		130