Comparative balance sheets for 2013 and 2012 and a statement of income for 2013

Question

Comparative balance sheets for 2013 and 2012 and a statement of income for 2013 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided.

Additional information from the accounting records:

a. During 2013, equipment with a cost of $300,000 (90% depreciated) was sold.

b. 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, 2013. Present cash flows from operating activities by the direct method. (You may omit the schedule to reconcile net income to cash flows from operating activities.)

Explanation / Answer

Answer:

METAGROBOLIZE INDUSTRIES Cash Flow Statement Particulars Amount Net income 975 Adjustment: Depreciation expense on building 30 Gain on sale of land -90 Depreciation expense equipment 315 Loss on sale of equipment 15 Amortization of patent 300 Increase in accounts receivable -150 Increase in inventory -375 Increase in accounts payable 300 Increase in accrued expenses payable 75 Cash Flow from operating activities 1395 Cash flow from investing activities: Purchase of land -15 Purchase of lease liability -150 Purchase of equipment -555 Cash flow from investing activities: -720 Cash Flow from financing activities: Cash Dividend paid -450 Cash Flow from financing activities: -450 Cash flow from all activities 225 Opening cash 375 closing cash 600

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