Question

Comparative balance sheets for 2021 and 2020 and a statement of income for 2021 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided.
 

METAGROBOLIZE INDUSTRIES Comparative Balance Sheets December 31, 2021 and 2020 ($ in thousands)
	2021				2020
Assets
Cash	$	390			$	170
Accounts receivable		370				200
Inventory		520				355
Land		525				500
Building		900				900
Less: Accumulated depreciation		(250	)			(225	)
Equipment		2,550				2,210
Less: Accumulated depreciation		(346	)			(320	)
Patent		1,100				1,300
	$	5,759			$	5,090
Liabilities
Accounts payable	$	620			$	470
Accrued liabilities		160				130
Lease liability—land		130				0
Shareholders' Equity
Common stock		3,120				3,000
Paid-in capital—excess of par		750				715
Retained earnings		979				775
	$	5,759			$	5,090

 

METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2021 ($ in thousands)
Revenues
Sales revenue	$	2,512
Gain on sale of land		35		$	2,547
Expenses
Cost of goods sold		820
Depreciation expense—building		25
Depreciation expense—equipment		188
Loss on sale of equipment		15
Amortization of patent		200
Operating expenses		500			1,748
Net income				$	799

 
Additional information from the accounting records:

1. Annual payments of $20,000 on the finance lease liability are paid each January 1, beginning in 2021.

2. During 2021, equipment with a cost of $180,000 (90% depreciated) was sold.

3. The statement of shareholders’ equity reveals reductions of $155,000 and $440,000 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.)
 

Answer 1

METAGROBOLIZE INDUSTRIES
Statement of Cash flows (in 000s)
For the Year Ended December 31, 2021
Cash flows from operating activities
Net Income		$     799
Adjustments for non cash effects:
Depreciation expense - building	$      25
Depreciation expense - equipment	$   188
Loss on sale of equipment	$      15
Amortization expense	$   200
Gain on sale of land	$   (35)
Changes in operating assets and liabilities
Increase in accounts receivable	$ (170)
Increase in inventories	$ (165)
Increase in accounts payable	$   150
Increase in accrued expense payable	$      30
		$     238
Net cash provided by operating activities		$ 1,037
Cash flows from investing activities
Cash received from sale of equipment	$        3		180*10%-15
Cash paid for purchase of equipment	$ (520)		2210-2550-180
Cash received from sale of land	$   160		500-525+150+35
Net cash used by investing activities		$   (357)
Cash flows from financing activities
Cash paid for lease liability	$   (20)
Cash paid for dividends	$ (440)
Net cash used by financing activities		$   (460)
Net Increase in cash and cash equivalents		$     220
Cash and cash equivalents at beginning of period		$     170
Cash and cash equivalents at end of period		$     390
Non cash investing and financing activities
Land acquired by lease		$     150
Issue of stock dividend		$     155

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