In: Accounting
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 |
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---|---|---|---|
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. |
c. Prepare separate schedules showing (1) cash paid for interest
and for income taxes and (2) noncash investing and financing
transactions.
(1) Supplemental Cash Flow Disclosures | ||
Cash paid for interest | Answer | |
Cash paid for income taxes | Answer | |
(2) Schedule of noncash investing and financing activities: | ||
AnswerPatent amortizationIssuance of preferred stock to acquire patentIssuance of bonds payableNet incomeNet change in cashPurchase of landBeginning cash balance | Answer |