Preparing a Statement of Cash Flows (Indirect Method)

Rainbow Company's income statement and comparative balance sheets follow.

a. Compute the change in cash and cash equivalents that occurred during 2016. b. Prepare a 2016 statement of cash flows using the indirect method. c. Prepare separate schedules showing (1) cash paid for interest and for income taxes and (2) noncash investing and financing transactions. d. Compute its (1) operating cash flow to current liabilities ratio, (2) operating cash flow to capital expenditures ratio, and (3) free cash flow.

Preparing a statement of Cash Flows (Indirect Method) Rainbow Company's Income statement and comparative balance sheets follow. $2,250,000 45,000 2,295,000 RAINBOW COMPANY Income Statement For Year Ended December 31, 2016 Sales Dividend Income Total Revenue Cost of Goods Sold $1,320,000 Wages and Other Operating Expenses 390,000 Depreciation Expense 117,000 Patent Amortization Expense 21,000 Interest Expense 39,000 Income Tax Expense 132,000 Loss on Sale of Equipment 15,000 Gain on Sale of Investments 19,000) za pense 2,025,000 $270,000 Net Income RAINBOW COMPANY Balance Sheets December 31, 2016 December 31, 2015 Assets $75,000 120,000 Cash and Cash Equivalents Accounts Receivable Inventory Prepaid Expenses Long-Term Investments Land 309,000 30,000 www - 570,000 1,335,000 (273,000) $75,000 90,000 231,000 18,000 w 171,000 300,000 1,050,000 (225,000) 675,000 (138,000) 96,000 $2,343,000 Buildings Accumulated Depreciation-Buildings Equipment .. Accumulated depreciation Equipment Patents 537,000 (126,000) 150,000 $2.727,000 Total Assets Liabilities and Stockholders' Equity Accounts Payable Interest Payable Income Tax Payable - Bonds Payable Preferred Stock ($100 par value) Common Stock ($5 par value) Paid-in capital in excess of par value-Common Retained Earnings Total Liabilities and Stockholders' Equity $78,000 18,000 24,000 465,000 300,000 1,137,000 399,000 306,000 $2,727,000 $48,000 15,000 30,000 375,000 225,000 1,092,000 372,000 186,000 $ $2,343,000 During 2016, the following transactions and events occurred: 1 Sold long-term investments costing $171,000 for $180,000 cash. 2 Purchased land for cash 3 Capitalized an expenditure made to improve the building 4 Sold equipment for $42.000 cash that originally cost $138,000 and had $81,000 accumulated depreciation. 5 Issued bonds payable at face value for cash. 6 Acquired a patent with a fair value of $75,000 by issuing 750 shares of preferred stock at par value. 7 Declared and paid a $150,000 cash dividend. & Issued 9,000 shares of common stock for cash at $8 per share. 9 Recorded depreciation of $48,000 on buildings and $69,000 on equipment. a. Compute the change in cash and cash equivalents that occurred during 2016. b. Prepare a 2016 statement of cash flows using the indirect method. c. Prepare separate schedules showing (1) cash paid for interest and for income taxes and (2) noncash investing and financing transactions. d. Compute its (1) operating cash flow to current liabilities ratio, (2) operating cash flow to capital expenditures ratio, and (3) free cash flow. part a part b. part c. part d. c. Prepare separate schedules showing (1) cash paid for Interest and for Income taxes and (2) noncash investing and financing transactions. (1) Supplemental Cash Flow Disclosures Cash paid for interest $ 0 Cash paid for income taxes $ 0 (2) Schedule of noncash investing and financing activities: $ 0 Please answer all parts of the question. Preparing a statement of Cash Flows (Indirect Method) Rainbow Company's Income statement and comparative balance sheets follow. $2,250,000 45,000 2,295,000 RAINBOW COMPANY Income Statement For Year Ended December 31, 2016 Sales Dividend Income Total Revenue Cost of Goods Sold $1,320,000 Wages and Other Operating Expenses 390,000 Depreciation Expense 117,000 Patent Amortization Expense ca 21,000 co Interest Expense 39,000 Pane Income Tax Expense 132,000 Loss on Sale of Equipment 15,000 Gain on Sale of Investments 19,000) 2,025,000 $270,000 Net Income RAINBOW COMPANY Balance Sheets December 31, 2016 December 31, 2015 Assets $75,000 120,000 309,000 30,000 Cash and Cash Equivalents Accounts Receivable Inventory Prepaid Expenses Long-Term Investments Land Buildings Accumulated Depreciation-Buildings . Equipment Accumulated depreciation Equipment Patents $75,000 90,000 231,000 231,00 18,000 171,000 20 300,000 www. 1,050,000 (225,000) 570,000 1,335,000 (273,000) 537,000 (126,000) 675,000 (138,000) 150,000 $2,727,000 96,000 $2.343,000 $48.000 Total Assets Liabilities and Stockholders' Equity Accounts Payable Interest Payable -- Income Tax Payable - Bonds Payable - Preferred Stock ($100 par value) Common Stock ($5 par value) Paid-in capital in excess of par value-Common Retained Earnings Total Liabilities and Stockholders' Equity $78,000 18,000 24,000 465,000 300,000 1,137,000 399,000 306,000 $2,727,000 15,000 30,000 375,000 225,000 1,092,000 372,000 186,000 $2,343,000 During 2016, the following transactions and events occurred: 1 Sold long-term investments costing $171,000 for $180,000 cash. 2 Purchased land for cash 3 Capitalized an expenditure made to improve the building 4 Sold equipment for $42,000 cash that originally cost $138,000 and had $81,000 accumulated depreciation. 5 Issued bonds payable at face value for cash. .. 6 Acquired a patent with a fair value of $75,000 by issuing 750 shares of preferred stock at par value. - 7 Declared and paid a $150,000 cash dividend. Issued 9,000 shares of common stock for cash at $8 per share. 9 9 Recorded depreciation of $48,000 on buildings and $69,000 on equipment. 8 a. Compute the change in cash and cash equivalents that occurred during 2016. b. Prepare a 2016 statement of cash flows using the indirect method. c. Prepare separate schedules showing (1) cash paid for interest and for income taxes and (2) noncash investing and financing transactions. d. Compute its (1) operating cash flow to current liabilities ratio, (2) operating cash flow to capital expenditures ratio, and (3) free cash flow. part a. part b. part part d. d. Compute its (1) operating cash flow to current liabilities ratio, (2) operating cash flow to capital expenditures ratio, and (3) free cash flow. Round your answers to (1) and (2) to two decimal places. (1) Operating cash flow to current liabilities ratio 1) 0 (2) Operating cash flow to capital expenditures ratio 0 (3) Free cash flow $ 0 Please answer all parts of the