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 $ 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 liabilities 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, 2021 ($ in thousands) 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 2021. During 2021, 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 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.)
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Problem 21-17 (Algo) Statement of cash flows ; indirect method [LO21-4, 21-8]
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 | $ | 405 | $ | 245 | ||||
| 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 liabilities | 150 | 130 | ||||||
| Lease liability—land | 130 | 0 | ||||||
| Shareholders' Equity | ||||||||
| Common stock | 3,100 | 3,000 | ||||||
| Paid-in capital—excess of par | 750 | 700 | ||||||
| 900 | 650 | |||||||
| $ | 5,630 | $ | 4,880 | |||||
| METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2021 ($ in thousands) |
||||||
| 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 2021.
- During 2021, 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 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.)
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