Preparing a Statement of Cash Flows (Direct Method) Rainbow Company's income statement and comparative balance sheets follow. RAINBOW COMPANY Income Statement For Year Ended December 31, 2018 Sales Dividend Income Total Revenue Cost of Goods Sold $750,000 15,000 765,000 $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 Gain on Sale of Investments Net Income 5,000 (3,000) 675,000 $90,000 Assets Cash and Cash Equivalents Accounts Receivable Inventory Prepaid Expenses Long-Term Investments RAINBOW COMPANY Balance Sheets December 31, 2018 December 31, 2017 $19,000 $25,000 40,000 30,000 103,000 77,000 10,000 6,000 57,000 190,000 100,000 445,000 350,000 (91,000) (75,000) 179,000 225,000 Caviament 42.0001 LAS COOL Land Buildings Accumulated Depreciation-Buildings Equipment Accumulated depreciation RAINBOW COMPANY Balance Sheets December 31, 2018 December 31, 2017 Assets Cash and Cash Equivalents Accounts Receivable Inventory $19,000 $25,000 40,000 30,000 103,000 77,000 Prepaid Expenses 10,000 6,000 Long-Term Investments 57,000 Land 190,000 100,000 Buildings 445,000 350,000 Accumulated Depreciation-Buildings (91,000) (75,000) Equipment 179,000 225,000 Accumulated depreciation-Equipment (42,000) (46,000) Patents 50,000 32,000 Total Assets $903,000 $781,000 Liabilities and Stockholders' Equity Accounts Payable $20,000 $16,000 Interest Payable 6,000 5,000 Income Tax Payable 8,000 10,000 Bonds Payable 155,000 125,000 Preferred Stock ($100 par value) 100,000 75,000 Common Stock ($5 par value) 379,000 364,000 Paid-in capital in excess of par value-Common 133,000 124,000 Retained Earnings 102,000 62,000 Total Liabilities and Stockholders' Equity $903,000 $781,000 During 2018, the following transactions and events occurred 1 Sid long-term investments costing $57.000 for $00.000 cash 2 Purchased land for cash 3 Capitalized an expenditure made to ironove the building Sold equipment for $14,000 cash that originality cost $46.000 and had $27.000 accumulated deprecation 5 Issued bonds payable at face value for cash & Acquired a patent with a fair value of $25,000 by mang 250 shares of preferred stock at par value 7 Declares and paid a $50,000 cash dividend. sissued 3000 shares of common stock for cash at $8 per share Recorded depreciation of $16,000 on buildings and $23,000 on equipment a. Compute the change in cash and cash equivalents that occurred during 2018. Note: Use a negative sign with your answer if the change is a decrease. b. Prepare a 2018 statement of cash flows using the direct method. Use one cash outflow for "cash paid for wages and other operating expenses Accounts payable relate to inventory purchases only. c. Prepare separate schedules showing (1) cash paid for interest and for income taxes and (2) noncash investing and financing transactions Note: Use negative signs to indicate a reduction in net cash/cash outflow. RAINBOW COMPANY STATEMENT OF CASH FLOWS (Direct Method) FOR YEAR ENDED DECEMBER 31, 2018 Cash flows from operating activities Cash received from customers 0 Cash received as dividends 0 $ 0 Cash paid for merchandise purchased 0 Cash paid for wages and other operating expenses 0 Cash paid for interest Cash paid for income taxes Net cash from operating activities 0 0 0 Cash flows from investing activities Sale of investments Improvements to building Sale of equipment Net cash from investing activities Cash flows from financing activities Issuance of common stock Payment of dividends Net cash from financing activities 4 0 0 0 4 Cash and cash equivalents at end of year Please answer all parts of the question. 0 0 0 0 A 0 0 Statement of Cash Flows Separate Schedules Note: Use negative signs to indicate a reduction in net cash/cash outflow. (1) Reconciliation of net income to net cash flow from operating activities = $ Add (deduct) items to convert net income to cash basis Depreciation Loss on sale of equipment Gain on sale of investments Accounts receivable increase Inventory increase Prepaid expenses increase Accounts payable increase Interest payable increase Income tax payable decrease Net cash provided by operating activities (2) Schedule of noncash investing and financing activities: Please answer all parts of the question. 0 0 0 0 0 0 0 0 0 0 0 0 0