Comparative balance sheets for 2018 and 2017 and a statement of income for 2018
ID: 2538988 • 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.
METAGROBOLIZE INDUSTRIES
Comparative Balance Sheets
December 31, 2018 and 2017
($ in 000s) 2018 2017
Assets
Cash $ 405 $ 245
Accounts receivable 350 190
Inventory 500 275
Land 500 450
Building 900 900
Less: Accumulated depreciation (200 ) (180)
Equipment 2,500 2,150
Less: Accumulated depreciation (325 ) (300 )
Patent 1,000 1,150
$ 5,630 $ 4,880
Liabilities
Accounts payable $ 600 $ 400
Accrued expenses payable 150 130
Lease liability—land 130 0
Shareholders' Equity
Common stock 3,100 3,000
Paid-in capital—excess of par 750 700
Retained earnings 900 650
$ 5,630 $ 4,880
METAGROBOLIZE INDUSTRIES
Income Statement
For the Year Ended December 31, 2018
($ in 000s)
Revenues
Sales revenue $ 2,555
Gain on sale of land 30 $ 2,585
Expenses Cost of goods sold $ 800
Depreciation expense—building 20
Depreciation expense—equipment 160
Loss on sale of equipment 10
Amortization of patent 150
Operating expenses 600 1,740
Net income $ 845
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 $150,000 (90% depreciated) was sold.
The statement of shareholders' equity reveals reductions of $150,000 and $445,000 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.)
Explanation / Answer
METAGROBOLIZE INDUSTRIES Statement of Cash Flow using Direct Method Particulars Amount in $ (000) Cash Flow From Operating Activities Cash received from customers (W. Note-1) 2395 Less : Cash payments for merchandise (W. Note-2) -825 Less :Cash payment for Operating expenses (W.Note-3) -580 Cash generated from operations 990 Less :Cash payments for income taxes - Net cash from operating activities (A) 990 Cash flows from investing activities Cash Paid for Equipment (W.Note-4) -500 Cash Received from sale of Equipment (W.Note-5) 5 Cash received for Land (W.Note-6) 110 Net cash used in investing activities (B) -385 Cash flows from financing activities Cash paid For dividend -445 Net cash used in financing activities ( C) -445 Net increase in cash and cash equivalents (A+B+C) 160 Cash at the beginning of the Year 245 Cash at the end of the Year 405 Non-Cash Investing and Finance Land aquired by lease 130 W.Note-1- Cash receieved from customers Beginning Account Receivable 190 Add :Sale During the year 2555 Less : Ending Account Receivable -350 2395 W.Note-2- Cash payments for merchandise Beginning Account Payable 400 Add :Ending Inventory 500 Less :Beginning Inventory -275 Add :Purchase During the year 800 Less : Ending Account Payable -600 825 W.Note-3-Cash paid for Operating expenses Beginning Accured expenses 130 Add :Operating Expenses During the year 600 Less : Ending Accured expenses -150 580 W.Note-4 Cash Paid for Equipment Equipment Gross Block 2150 Less : Sale of Equipment (Cost) -150 Net Gross Block 2000 Ending Gross Block 2500 Net Purchase 500 W.Note-5- Sale of Equipment Cost 150 Less : Depreciation 135 Net Gross Block 15 Loss on Asset -10 Sale Value 5 W.Note-6- Cash Received From Sale Changes in Land Value -50 Less : Lease Liablity 130 Gain From Land 30 Sale Value 110
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