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

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.

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:

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

Explanation / Answer

(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

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