P11-48. LO2 Statement of Cash Flows (Indirect Method) Rainbow Company's income statement and comparative balance sheets follow. RAINBOW COMPANY Income Statement For Year Ended December 31, 2019 Sales...... $750,000 Dividend income. 15,000 765,000 Cost of goods sold $440,000 Wages and other operating expenses 130,000 Depreciation expense.. 39.000 Patent amortization expense 7,000 Interest expense. 13,000 Income tax expense. 44,000 Loss on sale of equipment. 5,000 Gain on sale of investments (10,000) 668,000 Net income... $ 97,000 RAINBOW COMPANY Balance Sheet Dec. 31, 2019 Dec. 31, 2018 $ 19,000 40,000 103,000 10,000 Assets Cash and cash equivalents Accounts receivable. Inventory Prepaid expenses Investments-Available-for-sale. Land Buildings. Accumulated depreciation ---Buildings Equipment Accumulated depreciation Equipment Patents 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 AOCI (unrealized gain on investments) Total liabilities and equity 190,000 445,000 (91,000) 179,000 (42,000) 50,000 $903,000 $ 25,000 30,000 77,000 6,000 57,000 100,000 350,000 (75,000) 225,000 (46,000) 32,000 $781,000 $ 20,000 6,000 8,000 155,000 100,000 379,000 133,000 102,000 $ 16,000 5.000 10,000 125,000 75,000 364,000 124.000 55,000 7,000 $781,000 $903,000 During 2019, the following transactions and events occurred in addition to the company's usual busi- ness activities. 1. Sold AFS investments costing $50,000 for $60,000 cash. Unrealized gains totaling $7.000 related 8-20 AM 11/17/2020 Common stock ($5 par value) Paid-in capital in excess of par value-Common Retained earnings AOCI (unrealized gain on investments) Total liabilities and equity.. 379,000 133,000 102,000 ---- 364,000 124,000 55,000 7,000 $781,000 $903,000 During 2019, the following transactions and events occurred in addition to the company's usual busi- ness activities. 1. Sold AFS investments costing $50,000 for $60,000 cash. Unrealized gains totaling $7,000 related to these investments had been recorded in earlier years. 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 $50,000 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. Compute the change in cash and cash equivalents that occurred during 2019. b. Prepare a 2019 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. o 8:20 AM 1117/2020