P5-2 Preparing the Statement of Cash Flows (Indirect Method) LO5-1, 5-2, 5- 3,5-5,5-7 Selected financial information for Frank Corporation is presented below. Selected 2017 transactions are as follows: a. Purchased investment securities for $6,000 cash. b. Borrowed $17,000 on a two-year, 8 percent interest-bearing note. c. During 2017, sold machinery for its carrying amount; received $12,500 in cash. d. Purchased machinery for $52,000; paid $10,000 in cash and signed a four-year note payable to the dealer for $42,000. e. Declared and paid a cash dividend of $11,000 on December 31, 2017. Selected account balances at December 31, 2016 and 2017 are as follows: December 31 Cash Accounts receivable Inventory Accounts payable Accrued wages payable Income taxes payable 2017 2016 $ 83,000 $ 22,000 18,000 12,500 53,000 62,000 8,000 12,000 1,300 2,000 6,000 3,500 One-fourth of the sales and one-third of the purchases were made on credit. FRANK CORPORATION Statement of Earnings For the Year Ended December 31, 2017 Sales revenue $ 420,000 Cost of sales 278,000 142,000 Gross profit Expenses Salaries and wages Depreciation Rent (no accruals) Interest (no accruals) Income tax $ 52,000 10,200 6,800 13.200 12,800 Total expenses 95,000 Net earnings $ 47.000 1. Prepare a statement of cash flows for the year ended December 31, 2017 by using the indirect metho (Negative answers should be indicated by a minus sign.) FRANK CORPORATION Statement of Cash Flows For the Year Ended December 31, 2017 Cash flows from operating activities: Net earnings $ 47,000 Add (deduct) items not affecting cash: Decrease in accounts payable (4,000) Decrease in inventory 9,000 Increase in income tax payable 2,500 Depreciation expense 10,200 Decrease in wages payable (700) Increase in accounts receivable (5,500) $ 58,500 Net cash flow from operating activities Cash flows from investing activities: Purchase of investments Purchase of machinery Sale of machinery (6,000) (10,000) 12,500 (3,500) Net cash flow from investing activities Cash flows from financing activities: Payment of cash dividend Borrowing on long-term note (11,000) 17,000 6,000 61,000 Net cash inflow from financing activities Net increase in cash during 2017 Cash, beginning of 2017 Cash, end of 2017 22,000 83,000 $ 2. Compute the quality of earnings ratio and the capital expenditures ratio. (Enter your answers in numbers and not in percentages. Round the final answers to 2 decimal places.) ? only of this one! 1.24 Quality of earnings ratio Capital expenditures ratio