Preparing a Statement of Cash Flows $($Indirect Method$)$

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

RAINBOW COMPANY

Income Statement

For Year Ended December $31,2016$

Sales $$2,250,000$

Dividend Income $45,000$

Total Revenue $2,295,000$

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 $(9,000)2,025,000$

Net Income $$270,000$

RAINBOW COMPANY

Balance Sheets

December $31,2016$ December $31,2015$

Assets

Cash and Cash Equivalents $$75,000$ $$75,000$

Accounts Receivable $120,00090,000$

Inventory $309,000231,000$

Prepaid Expenses $30,00018,000$

Long$-$Term Investments $-171,000$

Land $570,000300,000$

Buildings $1,335,0001,050,000$

Accumulated Depreciation$-$Buildings $(273,000)(225,000)$

Equipment $537,000675,000$

Accumulated depreciation$-$Equipment $(126,000)(138,000)$

Patents $150,00096,000$

Total Assets $$2,727,000$ $$2,343,000$

Liabilities and Stockholders$$ Equity

Accounts Payable $$78,000$ $$48,000$

Interest Payable $18,00015,000$

Income Tax Payable $24,00030,000$

Bonds Payable $465,000375,000$

Preferred Stock $($$$100$ par value$)300,000225,000$

Common Stock $($$$5$ par value$)1,137,0001,092,000$

Paid$-$in capital in excess of par value$-$Common $399,000372,000$

Retained Earnings $306,000186,000$

Total Liabilities and Stockholders$$ Equity $$2,727,000$ $$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.

$8$ 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$.$

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 Answer

$0$

$(2)$ Operating cash flow to capital expenditures ratio Answer

$0$

$(3)$ Free cash flow Answer

$0$

Please answer all parts of the question.