Problem 21-5 (Algo) Statement of cash flows; direct method [LO21-3, 21-8] Comparative balance sheets for 2024 and 2023 and a statement of income for 2024 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided. Assets Cash Accounts receivable Inventory Land Building. Less: Accumulated depreciation Equipment Less: Accumulated depreciation Patent METAGROBOLIZE INDUSTRIES Comparative Balance Sheets December 31, 2024 and 2023 ($ in thousands) Liabilities Accounts payable Accrued liabilities Lease liability-land Shareholders' Equity Common stock Paid-in capital-excess of par Retained earnings Revenues Revenues Show Transcribed Text Net income METAGROBOLIZE INDUSTRIES Income Statement 2024 Sales revenue Gain on sale of land. Expenses Cost of goods sold $ 570 730 880 Depreciation expense-building Depreciation expense-equipment Loss on sale of equipment Amortization of patent Operating expenses 750 900 (250) 3,450 (364) 1,900 $ 8,566 For the Year Ended December 31, 2024 ($ in thousands) $980 340 130 3,700 800 2,616 $ 8,566 METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2024 ($ in thousands) 2023 445 685 900 (235) 3,290 (320) 2,000 $ 7,545 $ 3,143 85 $ 400 380 3,500 755 2,345 $ 7,545 $ 1,180 15 692 25 100 350 $ 680 265 0 3 Ć $ 3,228 2,362 $ 866 Additional information from the accounting records: a. Annual payments of $20,000 on the finance lease liability are paid each January 1, beginning in 2024. b. During 2024, equipment with a cost of $720,000 (90% depreciated) was sold. c. The statement of shareholders' equity reveals reductions of $245,000 and $350,000 for stock dividends and cash dividends, respectively. Required: Prepare the statement of cash flows of Metagrobolize for the year ended December 31, 2024. Present cash flows from operating activities by the direct method. Note: 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 21-5 (Algo) Statement of cash flows; direct method [LO21-3, 21-8]
Comparative balance sheets for 2024 and 2023 and a statement of income for 2024 are given below for Metagrobolize Industries.
Additional information from the accounting records of Metagrobolize also is provided.
Assets
Cash
Accounts receivable
Inventory
Land
Building
Less: Accumulated depreciation
Equipment
Less: Accumulated depreciation
Patent
Liabilities
Accounts payable
Accrued liabilities
Lease liability-land
Shareholders' Equity
Common stock
Paid-in capital-excess of par
Retained earnings
Revenues
METAGROBOLIZE INDUSTRIES
Comparative Balance Sheets
December 31, 2024 and 2023
($ in thousands)
Revenues
Show Transcribed Text
Expenses
Net income
METAGROBOLIZE INDUSTRIES
Income Statement
Sales revenue
Gain on sale of land
2024
Cost of goods sold
$ 570
730
880
Depreciation expense-building
Depreciation expense-equipment
Loss on sale of equipment
Amortization of patent
Operating expenses
750
900
(250)
3,450
(364)
1,900
$ 8,566
For the Year Ended December 31, 2024
($ in thousands)
$ 980
340
130
3,700
800
2,616
$ 8,566
METAGROBOLIZE INDUSTRIES
Income Statement
For the Year Ended December 31, 2024
($ in thousands)
2023
445
685
900
(235)
3,290
(320)
2,000
$ 7,545
$ 3,143
85
$ 400
380
3,500
755
2,345
$ 7,545
$ 1,180
15
692
25
100
350
$ 680
265
0
$ 3,228
2,362
$ 866
Additional information from the accounting records:
a. Annual payments of $20,000 on the finance lease liability are paid each January 1, beginning in 2024.
b. During 2024, equipment with a cost of $720,000 (90% depreciated) was sold.
c. The statement of shareholders' equity reveals reductions of $245,000 and $350,000 for stock dividends and cash dividends,
respectively.
Required:
Prepare the statement of cash flows of Metagrobolize for the year ended December 31, 2024. Present cash flows from operating
activities by the direct method.
Note: 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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7b8e1547-f0e2-45fd-b208-f2c216f27c1a%2F8ed94572-8aaa-493e-8113-888fe5bf18b8%2Fq0qmio_processed.jpeg&w=3840&q=75)
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