Requirements:
1. Prepare the statement of cash flows for Rabb Corporation for 2017 using the indirect method.
2. Evaluate the company's cash flows for the year. Discuss each of the categories of cash flows in your response.
The 2017 and 2016 balance sheets of Rabb Corporation follow. The 2017 income statement is also provided. Rabb had no noncash investing and financing transactions during 2017. During the year, the company sold equipment for $15, 100, which had originally cost $13,500 and had a book value of $10,500. The company did not issue any notes payable during the year but did issue common stock for $31,000. The company purchased plant assets and long-term investments with cash. Income Statement For the Year Ended December 31, 2017 $ 347,000 76,000 $ 271,000 Sales revenues Less: Cost of goods sold Gross profit Less operating expenses: Salaries and wages expense Depreciation expense $ 24,500 5,900 13,000 Other operating expenses 43,400 $ 227,600 Total operating expenses Operating income Plus other income and less other expenses: Interest expense 9,900 4,600 Gain on sale of PP&E Total other income and expenses Income before income taxes 5,300 222,300 37,000 185,300 Less: Income tax expense $ Net income 2016 Rabb Corporation Comparative Balance Sheets December 31, 2017 and 2016 Assets 2017 Current assets: Cash $ 51,500 $ Accounts receivable 32,300 Inventory 86,500 3,300 Prepaid insurance Total current assets 173,600 $ 20,500 29,100 93,000 2,600 145,200 Property, plant, and equipment Less: Accumulated depreciation Investments 138,000 (27,400) 152,000 (30,300) 117,000 412,300 $ 255,800 Total assets Liabilities $ Current liabilities: Accounts payable Wages payable Interest payable Income taxes payable Other accrued expenses payable Total current liablities 33,900 $ 2,900 2,100 5,400 18,500 36,500 7,300 0 22,500 S 62,800 $ 66,300 Long-term liabilities Total liabilities 76,000 138,800 $ 110,000 176,300 $ Stockholders' equity Common stock Retained earnings $ 102,000 $ 171,500 273,500 $ 71,000 8,500 79,500 Total stockholders' equity $ $ 412,300 $ 255,800 Total liabilities and equity For the Year Ended December 31, 2017 Operating Activities: Adjustments to reconcile net income to cash basis: Net cash provided by (used for) operating activities
