Chapter 21, Problem 21.5P

Statement of cash flows; direct method

• LO21–3, LO21–8

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.

Additional information from the accounting records:

a. Annual payments of $20,000 on the finance lease liability are paid each January 1, beginning in 2018.

b. During 2018, equipment with a cost of $300,000 (90% depreciated) was sold.

c. The statement of shareholders’ equity reveals reductions of $225,000 and $450,000 for stock dividends and cash dividends, respectively.

Required:

Prepare the statement of cash flows of Metagrobolize for the year ended December 31, 2018. Present cash flows from operating activities by the direct method. (You may omit the schedule to reconcile net income to cash flows from operating activities.)