13A-5 (Algo) Prepare and Interpret a Statement of Cash Flows [LO13-1, LO13-4] Mary Walker, president of Rusco Company, considers $29,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $24,000 in cash was available at the end of this year. Since the company reported a large net Income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker. Rusco Company Comparative Balance Sheet at July 31 Assets Current assets: Cash Accounts receivable Inventory Prepaid expenses Total current assets Long-term investments Plant and equipment Less accumulated depreciation Net plant and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Stockholders' equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Rusco Company Income Statement This Year Last Year $ 24,000 210,800 $ 43,800 221,700 258,100 13,300 201,400 25,800 506,200 492,700 117,000 165,000 878,000 759,000 214,500 192,700 663,500 $ 1,286,700 566,300 $ 1,224,000 $ 183,100 8,900 $ 239,900 16,800 49,200 43,500 241,200 300,200 227,000 118,000 468,200 418,200 669,500 645,000 149,000 160,800 818,500 805,800 $ 1,286,700 $ 1,224,000 Gross margin Selling and administrative expenses Net operating income For This Year Ended July 31 Sales $ 980,000 Cost of goods sold 612,500 367,500 262,150 105,350 $ 24,500 (7,800) 16,700 122,050 36,570 $ 85,480 Nonoperating items: Gain on sale of investments Loss on sale of equipment Income before taxes Income taxes Net income The following additional Information is available for this year. a. The company declared and paid a cash dividend. b. Equipment was sold during the year for $51,200. The equipment originally cost $108,000 and had accumulated depreciation of $49,000. c. Long-term investments that cost $48,000 were sold during the year for $72,500. d. The company did not retire any bonds payable or repurchase any of its common stock. Because the Cash account decreased so dramatically during this year, the company's executive committee is anxious to see how the Income statement would appear on a cash basis. Required: 1. Using the direct method, adjust the company's Income statement for this year to a cash basis. 2. Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for this year. The following additional Information is available for this year. a. The company declared and paid a cash dividend. b. Equipment was sold during the year for $51,200. The equipment originally cost $108,000 and had accumulated depreciation of $49,000. c. Long-term investments that cost $48,000 were sold during the year for $72,500. d. The company did not retire any bonds payable or repurchase any of its common stock. Because the Cash account decreased so dramatically during this year, the company's executive committee is anxious to see how the Income statement would appear on a cash basis. Required: 1. Using the direct method, adjust the company's Income statement for this year to a cash basis. 2. Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for this year. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Using the direct method, adjust the company's income statement for this year to a cash basis. (Adjustment amounts that are to be deducted should be indicated with a minus sign.) Rusco Company Direct Method of Determining the Net Cash flows from Operating activities Adjustments to a cash basis: Adjustments to a cash basis: Selling and administrative expenses Adjustments to a cash basis: Income taxes Adjustments to a cash basis: < Required 1 Required 2 > Required 1 Required 2 Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for this year. (Cash outflows and amounts to be deducted should be indicated with a minus sign.) Rusco Company Statement of Cash Flows For This Year Ended July 31 Operating activities: Cash received from customers Less cash disbursements for Total cash disbursements Investing activities: Financing activities: Beginning cash and cash equivalents Ending cash and cash equivalents < Required 1 Required 2 >