The Sky Company's income statement and comparative balance sheets as of December 31 of 2019 and 2018 follow:

During the year, the following transactions occurred:

1. Sold long-term investments costing \(\$ 50,000\) for \(\$ 60,000\) cash. Unrealized gains totaling \(\$ 7,000\) related to these investments had been recorded in earlier years. At year-end, the fair value adjustment and unrealized gain account balances were eliminated.

2. Purchased land for cash.

3. Capitalized an expenditure made to improve the building.

4. Sold equipment for \(\$ 14,000\) cash that originally cost \(\$ 46,000\) and had \(\$ 27,000\) accumulated depreciation.

5. Issued bonds payable at face value for cash.

6. Acquired a patent with a fair value of \(\$ 25,000\) by issuing 250 shares of preferred stock at par value.

7. Declared and paid a \(\$ 53,000\) cash dividend.

8. Issued 3,000 shares of common stock for cash at \(\$ 8\) per share.

9. Recorded depreciation of \(\$ 16,000\) on buildings and \(\$ 23,000\) on equipment.

Required

a. Calculate the change in cash and cash equivalents that occurred during 2019.

b. Prepare a statement of cash flows using the indirect method.

Transcribed Image Text:

Sales revenue.. Dividend income.. Cost of goods sold. SKY COMPANY Income Statement For Year Ended December 31, 2019 Wages and other operating expenses Depreciation expense... Patent amortization expense Interest expense........ Income tax expense.. Loss on sale of equipment. Gain on sale of investments. Net income..... $800,000 19,000 819,000 $440,000 130,000 39,000 7,000 13,000 30,000 5,000 (10,000) 654,000 $165,000