Rainbow Companys income statement and comparative balance sheets follow.

RAINBOW COMPANY

Income Statement

For Year Ended December $31,2019$

Sales $$675,000$

Dividend income $13,500$

$688,500$

Cost of goods sold $$396,000$

Wages and other operating expenses $117,000$

Depreciation expense $35,100$

Patent amortization expense $6,300$

Interest expense $11,700$

Income tax expense $39,600$

Loss on sale of equipment $4,500$

Gain on sale of investments $(9,000)601,200$

Net income $$87,300$

RAINBOW COMPANY

Balance Sheet

Dec. $31,$ Dec. $31,$

$20192018$

Assets

Cash and cash equivalents $$17,100$ $$22,500$

Accounts receivable $36,00027,000$

Inventory $92,70069,300$

Prepaid expenses $9,0005,400$

InvestmentsAvailable$-$for$-$sale $051,300$

Land $171,00090,000$

Buildings $400,500315,000$

Accumulated depreciationBuildings $(81,900)(67,500)$

Equipment $161,100202,500$

Accumulated depreciationEquipment $(37,800)(41,400)$

Patents $45,00028,800$

Total assets $$812,700$ $$702,900$

Liabilities and Stockholders Equity

Accounts payable $$18,000$ $$14,400$

Interest payable $5,4004,500$

Income tax payable $7,2009,000$

Bonds payable $139,500112,500$

Preferred stock $($$$100$ par value$)90,00067,500$

Common stock $($$$5$ par value$)341,100327,600$

Paid$-$in capital in excess of par valueCommon $119,700111,600$

Retained earnings $91,80049,500$

AOCI $($unrealized gain on investments$)06,300$

Total liabilities and equity $$812,700$ $$702,900$

During $2019,$ the following transactions and events occurred in addition to the companys usual business activities.

$(1)$ Sold AFS investments costing $$45,000$ for $$54,000$ cash. Unrealized gains totaling $$6,300$ 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 $$12,600$ cash that originally cost $$41,400$ and had $$24,300$ accumulated depreciation.

$(5)$ Issued bonds payable at face value for cash.

$(6)$ Acquired a patent with a fair value of $$22,500$ by issuing $250$ shares of preferred stock at par value.

$(7)$ Declared and paid a $$45,000$ cash dividend.

$(8)$ Issued $2,700$ shares of common stock for cash at $$8$ per share.

$(9)$ Recorded depreciation of $$14,400$ on buildings and $$20,700$ on equipment.

Required

a$.$ Compute the change in cash and cash equivalents that occurred during $2019.$

Note: Do not use a negative sign with your answer.

$Answer

$0$

Answer

b$.$ Prepare a $2019$ 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.

Note: If a label isn't required, enter $"$N$/$A$"$ for the label and enter zero for the amount $($or leave the amount blank$).$

Note: Use a negative sign to indicate a cash outflow.

RAINBOW COMPANY

Statement of Cash Flows

For Year Ended December $31,2019$

Operating Activities

Cash Received from Customers Answer

$0$

Cash Received as Dividends Answer

$0$

Cash Paid for Merchandise Purchased Answer

$0$

Cash Paid for Wages and Other Op Expenses Answer

$0$

Cash Paid for Interest Answer

$0$

Cash Paid for Income Taxes Answer

$0$

Answer

Answer

$0$

Investing Activities

Answer

Answer

$0$

Purchase of Land Answer

$0$

Answer

Answer

$0$

Answer

Answer

$0$

Answer

Answer

$0$

Financing Activities

Issuance of Bonds Payable Answer

$0$

Issuance of Common Stock Answer

$0$

Answer

Answer

$0$

Answer

Answer

$0$

Net Decrease in Cash and Cash Equivalents Answer

$0$

Cash and Cash Equivalents at Beginning of Year Answer

$0$

Cash and Cash Equivalents at End of Year Answer

$0$

c$.$ Prepare separate schedules showing $(1)$ reconciliation of net income to cash flow from operating activities and $(2)$ noncash investing and financing transactions.

$(1)$ Reconciliation of net income to cash flow from operating activities

Net Income Answer

$0$

Add $($Deduct$)$ Items to Convert Net Income to

Cash from Operations

Depreciation Answer

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

Accounts Receivable Increase Answer

$0$

Inventory Increase Answer

$0$

Prepaid Expenses Increase Answer

$0$

Accounts Payable Increase Answer

$0$

Interest Payable Increase Answer

$0$

Income Tax Payable Decrease Answer

$(2)$ Schedule of Noncash Investing and Financing Activities

$0$

Answer rating: 100% (QA)

a To compute the change in cash and cash equivalents that occurred during 2019 we need to compare the cash and cash equivalents at the end of 2019 wit... View the full answer