Comparative balance sheets for 2016 and 2015 and a statement of income for 2016

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 $ 600 $ 375 Accounts receivable 600 450 Inventory 900 525 Land 675 600 Building 900 900 Less: Accumulated depreciation (300) (270) Equipment 2,850 2,250 Less: Accumulated depreciation (525) (480) Patent 1,200 1,500 $ 6,900 $ 5,850 Liabilities Accounts payable $ 750 $ 450 Accrued expenses payable 300 225 Lease liability—land 150 0 Shareholders' Equity Common stock 3,150 3,000 Paid-in capital—excess of par 750 675 Retained earnings 1,800 1,500 $ 6,900 $ 5,850. The pairs of numbers represent 2016 and 2015. 2016 is the first number and 2015 is the second number for the different accounts. METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2016 ($ in 000s) Revenues Sales revenue $ 2,645 Gain on sale of land 90 $ 2,735 Expenses Cost of goods sold $ 600 Depreciation expense—building 30 Depreciation expense—equipment 315 Loss on sale of equipment 15 Amortization of patent 300 Operating expenses $ 500 1,760 Net income $ 975 Additional information from the accounting records: a. During 2016, 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, 2016. Present cash flows from operating activities by the direct 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.)

Explanation / Answer

Metagrobolize All Amounts in $ Cash Flow Statement for the year ended December 31, 2016 Cash Flows from Operating Activities Net Income 975 Add : Depreciation 315 Add : Loss on Sale of Equipment 15 Add : Amortisation of Patents 300 Less : Gain on Sale of Land -90 540 Cash Flows before Working Capital Changes 1515 Less : Increase in Accounts Receivable -150 Less : Increase in Inventory -375 Add : Increase in Accounts Payable 300 Add : Increase in Accrued Expenses 75 -150 Cash Inflows from Operating Activities 1365 Cash Flows from Investing Activities Sale of Land 60 Purchase of Land -15 Purchase of Equipment -900 Sale of Equipment 15 Lease taken against land purchased 150 -690 Cash Flows from Financing Activities Issue of Share Capital 225 Dividends Paid -675 -450 Net Increase in Cash and Cash Equivalents 225 Cash and Cash Equivalents at the beginning 375 Cash and Cash Equivalents at the end 600

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