Animation based on replacing sprites in sprite renderer does not work?

I have issues with creating a sprite animation. For my previous projects the workflow for sprite sheet animations was like this.

1) create game object with sprite renderer and animation component

2) open animation window and lock the inspector on the object

3) drag and drop sliced sprite sheet onto the animation window

After these steps it worked. Now in Unity 5, my sprites are not being updated - the sprite field in sprite renderer component is highlighted as red, as if animation was doing something, but the sprites are not being replaced. I have flagged the animation as a legacy one.

Has anyone dealt with such a problem?