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			$	190
Accounts receivable		450				240
Inventory		600				375
Land		600				560
Building		900				900
Less: Accumulated depreciation		(300	)			(285	)
Equipment		2,750				2,450
Less: Accumulated depreciation		(430	)			(400	)
Patent		1,500				1,650
	$	6,460			$	5,680
Liabilities
Accounts payable	$	700			$	550
Accrued liabilities		200				175
Lease liability—land		130				0
Shareholders' Equity
Common stock		3,110				3,000
Paid-in capital—excess of par		550				485
Retained earnings		1,770				1,470
	$	6,460			$	5,680

METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2021 ($ in thousands)
Revenues
Sales revenue	$	2,765
Gain on sale of land		55		$	2,820
Expenses
Cost of goods sold		900
Depreciation expense—building		15
Depreciation expense—equipment		300
Loss on sale of equipment		10
Amortization of patent		150
Operating expenses		550			1,925
Net income				$	895

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 $300,000 (90% depreciated) was sold.
3. The statement of shareholders’ equity reveals reductions of $175,000 and $420,000 for stock dividends and cash dividends, respectively.

Required:
Prepare the statement of cash flows for Metagrobolize Industries using the indirect method.

Answer 1

Answer-

METAGROBOLIZE INDUSTRIES
STATEMENT OF CASH FLOWS (USING INDIRECT METHOD)
FOR THE YEAR ENDED 31 DECEMBER,2021
Particulars		Amount
		$
Cash flow from operating activities
Net Income		895
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation	($15+$300)	315
Loss on sale of equipment		10
Amortization expense-Patent		150
Gain on sale of land		-55
Change in operating assets & liabilities
Increase in accounts receivable		-210
Increase in inventory		-225
Increase in accounts payable		150
Increase in accrued liabilities		25
Net cash flow from operating activities (a)		1055
Cash Flow from Investing activities
New equipment purchased		-600
Old equipment sold		20
Land sold		145
Net cash Flow from Investing activities (b)		-435
Cash Flow from Financing activities
Cash dividends paid		-420
Net cash Flow from Financing activities (c)		-420
Net Change in cash c=a+b+c		200
Beginning cash balance		190
Closing cash balance		390