Rainbow Companys income statement and comparative balance sheets follow.

RAINBOW COMPANY
Income Statement
For Year Ended December 31,2019
Sales		$825,000
Dividend income		16,500
		841,500
Cost of goods sold	$484,000
Wages and other operating expenses	143,000
Depreciation expense	42,900
Patent amortization expense	7,700
Interest expense	14,300
Income tax expense	48,400
Loss on sale of equipment	5,500
Gain on sale of investments	(11,000)	734,800
Net income		$106,700

RAINBOW COMPANY
Balance Sheet
	Dec. 31,	Dec. 31,
	2019	2018
Assets
Cash and cash equivalents	$20,900	$27,500
Accounts receivable	44,000	33,000
Inventory	113,300	84,700
Prepaid expenses	11,000	6,600
InvestmentsAvailable-for-sale	0	62,700
Land	209,000	110,000
Buildings	489,500	385,000
Accumulated depreciationBuildings	(100,100)	(82,500)
Equipment	196,900	247,500
Accumulated depreciationEquipment	(46,200)	(50,600)
Patents	55,000	35,200
Total assets	$993,300	$859,100
Liabilities and Stockholders Equity
Accounts payable	$22,000	$17,600
Interest payable	6,600	5,500
Income tax payable	8,800	11,000
Bonds payable	170,500	137,500
Preferred stock ($100 par value)	110,000	82,500
Common stock ($5 par value)	416,900	400,400
Paid-in capital in excess of par valueCommon	146,300	136,400
Retained earnings	112,200	60,500
AOCI (unrealized gain on investments)	0	7,700
Total liabilities and equity	$993,300	$859,100

During 2019, the following transactions and events occurred in addition to the companys usual business activities. (1) Sold AFS investments costing $55,000 for $66,000 cash. Unrealized gains totaling $7,700 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 $15,400 cash that originally cost $50,600 and had $29,700 accumulated depreciation. (5) Issued bonds payable at face value for cash. (6) Acquired a patent with a fair value of $27,500 by issuing 250 shares of preferred stock at par value. (7) Declared and paid a $55,000 cash dividend. (8) Issued 3,300 shares of common stock for cash at $8 per share. (9) Recorded depreciation of $17,600 on buildings and $25,300 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

AnswerIncrease in cash and cash equivalentsDecrease in cash and cash equivalentsNeither an increase or decrease in cash and cash equivalents 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
Cash Received as Dividends	Answer
Cash Paid for Merchandise Purchased	Answer
Cash Paid for Wages and Other Op Expenses	Answer
Cash Paid for Interest	Answer
Cash Paid for Income Taxes	Answer
AnswerNet Cash Provided by Operating ActivitiesNet Cash Used by Operating ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Used by Investing ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Used by Financing Activities		Answer
Investing Activities
AnswerLoss on Sale of InvestmentsGain on Sale of InvestmentsSale of InvestmentsPurchase of InvestmentsN/A	Answer
Purchase of Land	Answer
AnswerImprovements to BuildingIssuance of Preferred StockPaid-in Capital IncreasePatent AmortizationPayment of DividendsPurchase of PatentRetained Earnings IncreaseN/A	Answer
AnswerLoss on Sale of EquipmentGain on Sale of EquipmentSale of EquipmentPurchase of EquipmentN/A	Answer
AnswerNet Cash Provided by Operating ActivitiesNet Cash Used by Operating ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Used by Investing ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Used by Financing Activities		Answer
Financing Activities
Issuance of Bonds Payable	Answer
Issuance of Common Stock	Answer
AnswerImprovements to BuildingIssuance of Preferred StockPaid-in Capital IncreasePatent AmortizationPayment of DividendsPurchase of PatentRetained Earnings IncreaseN/A	Answer
AnswerNet Cash Provided by Operating ActivitiesNet Cash Used by Operating ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Used by Investing ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Used by Financing Activities		Answer
Net Decrease in Cash and Cash Equivalents		Answer
Cash and Cash Equivalents at Beginning of Year		Answer
Cash and Cash Equivalents at End of Year		Answer

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
Add (Deduct) Items to Convert Net Income to
Cash from Operations
Depreciation	Answer
AnswerImprovements to BuildingIssuance of Preferred StockPaid-in Capital IncreasePatent AmortizationPayment of DividendsPurchase of PatentRetained Earnings IncreaseN/A	Answer
AnswerLoss on Sale of EquipmentGain on Sale of EquipmentSale of EquipmentPurchase of EquipmentN/A	Answer
AnswerLoss on Sale of InvestmentsGain on Sale of InvestmentsSale of InvestmentsPurchase of InvestmentsN/A	Answer
Accounts Receivable Increase	Answer
Inventory Increase	Answer
Prepaid Expenses Increase	Answer
Accounts Payable Increase	Answer
Interest Payable Increase	Answer
Income Tax Payable Decrease	Answer
AnswerNet Cash Provided by Operating ActivitiesNet Cash Used by Operating ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Used by Investing ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Used by Financing Activities	Answer

(2) Schedule of Noncash Investing and Financing Activities AnswerCapitalization of Building ImprovementDeclaration of Cash DividendIssuance of BondsIssuance of Preferred Stock to Acquire PatentSale of EquipmentN/A