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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
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 | $1,500,000 | ||
Dividend Income | 30,000 | ||
Total Revenue | 1,530,000 | ||
Cost of Goods Sold | $880,000 | ||
Wages and Other Operating Expenses | 260,000 | ||
Depreciation Expense | 78,000 | ||
Patent Amortization Expense | 14,000 | ||
Interest Expense | 26,000 | ||
Income Tax Expense | 88,000 | ||
Loss on Sale of Equipment | 10,000 | ||
Gain on Sale of Investments | (6,000) | 1,350,000 | |
Net Income | $180,000 |
RAINBOW COMPANY Balance Sheets | |||
---|---|---|---|
December 31, 2016 | December 31, 2015 | ||
Assets | |||
Cash and Cash Equivalents | $48,000 | $50,000 | |
Accounts Receivable | 80,000 | 60,000 | |
Inventory | 206,000 | 154,000 | |
Prepaid Expenses | 20,000 | 12,000 | |
Long-Term Investments | - | 114,000 | |
Land | 380,000 | 200,000 | |
Buildings | 890,000 | 700,000 | |
Accumulated Depreciation-Buildings | (182,000) | (150,000) | |
Equipment | 358,000 | 450,000 | |
Accumulated depreciation-Equipment | (84,000) | (92,000) | |
Patents | 100,000 | 64,000 | |
Total Assets | $1,816,000 | $1,562,000 | |
Liabilities and Stockholders Equity | |||
Accounts Payable | $50,000 | $32,000 | |
Interest Payable | 12,000 | 10,000 | |
Income Tax Payable | 16,000 | 20,000 | |
Bonds Payable | 310,000 | 250,000 | |
Preferred Stock ($100 par value) | 200,000 | 150,000 | |
Common Stock ($5 par value) | 758,000 | 728,000 | |
Paid-in capital in excess of par value-Common | 266,000 | 248,000 | |
Retained Earnings | 204,000 | 124,000 | |
Total Liabilities and Stockholders Equity | $1,816,000 | $1,562,000 |
During 2016, the following transactions and events occurred:
1 | Sold long-term investments costing $114,000 for $120,000 cash. | |
2 | Purchased land for cash. | |
3 | Capitalized an expenditure made to improve the building. | |
4 | Sold equipment for $28,000 cash that originally cost $92,000 and had $54,000 accumulated depreciation. | |
5 | Issued bonds payable at face value for cash. | |
6 | Acquired a patent with a fair value of $50,000 by issuing 500 shares of preferred stock at par value. | |
7 | Declared and paid a $100,000 cash dividend. | |
8 | Issued 6,000 shares of common stock for cash at $8 per share. | |
9 | Recorded depreciation of $32,000 on buildings and $46,000 on equipment. |
- 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 |
(2) | Operating cash flow to capital expenditures ratio | Answer |
(3) | Free cash flow | Answer |
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