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	$	560			$	370
Accounts receivable		710				370
Inventory		860				440
Land		700				670
Building		900				900
Less: Accumulated depreciation		(200	)			(160	)
Equipment		3,400				3,230
Less: Accumulated depreciation		(343	)			(300	)
Patent		1,800				2,100
	$	8,387			$	7,620
Liabilities
Accounts payable	$	960			$	710
Accrued expenses payable		330				260
Lease liability—land		130				0
Shareholders' Equity
Common stock		3,680				3,500
Paid-in capital—excess of par		800				740
Retained earnings		2,487				2,410
	$	8,387			$	7,620

METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2018 ($ in 000s)
Revenues
Sales revenue	$	3,131
Gain on sale of land		80		$	3,211
Expenses
Cost of goods sold	$	1,160
Depreciation expense—building		40
Depreciation expense—equipment		664
Loss on sale of equipment		25
Amortization of patent		300
Operating expenses	$	350			2,539
Net income				$	672

Additional information from the accounting records:

1. Annual payments of $20,000 on the finance lease liability are paid each January 1, beginning in 2018.
2. During 2018, equipment with a cost of $690,000 (90% depreciated) was sold.
3. The statement of shareholders’ equity reveals reductions of $240,000 and $355,000 for stock dividends and cash dividends, respectively.
   Cash flows from operating activities: Net income Adjustments for noncash effects: Depreciation expense—Building Depreciation expense-Equipment Loss on sale of land Amortization of patent Changes in operating assets and liabilities: Increase in accounts receivable Increase in inventory Increase in accounts payable Increase in accrued expenses Net cash flows from operating activities
   

Answer 1

Cash Flow Statement is as prepared below:

METAGROBOLIZE INDUSTRIES
Statement of Cash Flows
For the year ended December 31, 2018
Particulars	Amount ($)	Amount ($)
Cash Flow from Operating activities:
Net Income		672
Adjustments to reconcile net income to net cash provided by opearting activities
Depreciation Expense-building	40
Depreciation Expense-Equipment	664
Loss on sale of equipment	25
Amortization of patent	300
Gain on sale of land	-80
		1,621
Changes in operating assets and liabilities:
Increase in account receivable	-340
Decrease in Inventory	-420
Increase in Accounts Payable	250
Increase in accrued expenses	70
Net Cash flows from Operating Activities		1,181
Investing Activities:
Purchase of Equipment	-860
Sale of equipment	44
Sale of land	180
Net Cash flows provided by investing activities		-636
Financing Activities:
Payment on lease liabilities
Payment on Cash dividends	-595
Common Stock issued	240
Net Cash flows used in financing activities		-355
Net increase in Cash balance		190
Cash balance, January 1		370
Cash balance, December 31		560
Non Cash activities
Acquired land	130

Working:

Equipment
Particulars	Amount ($)	Particulars	Amount ($)
opening	3,230	Acc dep	621
Cash	860	Loss on sale of equipment	25
		Cash	44
	4,090		690
closing	3,400
Acc Dep
Particulars	Amount ($)	Particulars	Amount ($)
Equipment	621	opening	300
		Dep	664
	621		964
		closing	343

Retained earnings
Particulars	Amount ($)	Particulars	Amount ($)
Dividend	595	opening	2,410
		Net Income	672
	595		3,082
		closing	2,487
Land
Particulars	Amount ($)	Particulars	Amount ($)
opening	670	Cash	180
Lease liability	130
Gain on sale of land	80
	880		180
closing	700