The Rainbow Company's income statement and comparative balance sheets as of December 31 of 2013 and 2012 follow:

RAINBOW COMPANY Income Statement For the Year Ended December 31, 2013
Sales Revenue		$975,000
Dividend Income		19,500
		994,500
Cost of Goods Sold	$572,000
Wages and Other Operating Expenses	169,000
Depreciation Expense	50,700
Patent Amortization Expense	9,100
Interest Expense	16,900
Income Tax Expense	57,200
Loss on Sale of Equipment	6,500
Gain on Sale of Investments	(13,000)	868,400
Net Income		$126,100

RAINBOW COMPANY Balance Sheets
	Dec. 31, 2013	Dec. 31, 2012
Assets
Cash and Cash Equivalents	$24,700	$32,500
Accounts Receivable	52,000	39,000
Inventory	133,900	100,100
Prepaid Expenses	13,000	7,800
Long-term Investments-Available for Sale	-	65,000
Fair Value Adjustment to Investments	-	9,100
Land	247,000	130,000
Buildings	578,500	455,000
Accumulated Depreciation - Buildings	(118,300)	(97,500)
Equipment	232,700	292,500
Accumulated Depreciation-Equipment	(54,600)	(59,800)
Patents	65,000	41,600
Total Assets	$1,173,900	$1,015,300
Liabilities and Stockholders' Equity
Accounts Payable	$26,000	$20,800
Interest Payable	7,800	6,500
Income Tax Payable	10,400	13,000
Bonds Payable	201,500	162,500
Preferred Stock ($100 par value)	130,000	97,500
Common Stock ($5 par value)	492,700	473,200
Paid-in-capital in Excess of Par Value-Common	172,900	161,200
Retained Earnings	132,600	71,500
Unrealized Gain on Investments	-	9,100
Total Liabilities and Stockholders' Equity	$1,173,900	$1,015,300

During the year, the following transactions occurred: 1. Sold long-term investments costing $65,000 for $78,000 cash. Unrealized gains totaling $9,100 related to these investments had been recorded in earlier years. At year-end, the fair value adjustment and unrealized gain account balances were eliminated. 2. Purchased land for cash. 3. Capitalized an expenditure made to improve the building. 4. Sold equipment for $18,200 cash that originally cost $59,800 and had $35,100 accumulated depreciation. 5. Issued bonds payable at face value for cash. 6. Acquired a patent with a fair value of $32,500 by issuing 325 shares of preferred stock at par value. 7. Declared and paid a $65,000 cash dividend. 8. Issued 3,900 shares of common stock for cash at $8 per share. 9. Recorded depreciation of $20,800 on buildings and $29,900 on equipment. Required a. Calculate the change in cash and cash equivalents that occurred during 2013. b. Prepare a statement of cash flows using the indirect method. a. Change in Cash during 2013 $Answer

AnswerIncreaseDecrease

b. Use a negative sign with cash outflow answers.

RAINBOW COMPANY Statement of Cash Flows For Year Ended December 31, 2013
Cash Flow from Operating Activities
Net Income		Answer
Add (deduct) items to convert net income to cash basis
Depreciation		Answer
Patent Amortization		Answer
Loss on Sale of Equipment		Answer
Gain on Sale of Investments		Answer
Accounts Receivable	AnswerIncreaseDecrease	Answer
Inventory	AnswerIncreaseDecrease	Answer
Prepaid Expenses	AnswerIncreaseDecrease	Answer
Accounts Payable	AnswerIncreaseDecrease	Answer
Interest Payable	AnswerIncreaseDecrease	Answer
Income Tax Payable	AnswerIncreaseDecrease	Answer
Cash Flow Provided by Operating Activities		Answer
Cash Flow from Investing Activities
Sale of Investments		Answer
Purchase of Land		Answer
Improvements to Building		Answer
Sale of equipment		Answer
Cash Used by Investing Activities		Answer
Cash Flow from Financing Activities
Issuance of Bonds Payable		Answer
Issuance of Common Stock		Answer
Payment of Dividends		Answer
Cash Provided by Financing Activities		Answer
NetChange in Cash		Answer
Cash at Beginning of Year		Answer
Cash at End of Year		Answer