Comparative balance sheets for 2018 and 2017 and a statement of income for 2018
ID: 2521427 • Letter: C
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.
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 $350,000 for stock dividends and cash dividends, respectively.
Required:
Prepare the statement of cash flows for Metagrobolize Industries using the indirect method. (Enter your answers in thousands. (i.e., 10,000 should be entered as 10).) Amounts to be deducted should be indicated with a minus sign.)
Comparative Balance Sheets
December 31, 2018 and 2017
($ 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
Explanation / Answer
Answer:
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
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
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