2.

Mary Walker, president of Rusco Company, considers $37,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $32,000 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. Last Year Rusco Company Comparative Balance Sheet at July 31 This Year Assets Current assets: Cash 32,000 Accounts receivable 220,400 Inventory 265, 300 Prepaid expenses 18,900 Total current assets 536, 600 Long-term investments 141,000 Plant and equipment 894,000 Less accumulated depreciation 218,500 Net plant and equipment 675,500 Total assets $1,353,100 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 190,300 Accrued liabilities 9,700 Income taxes payable 55,600 Total current liabilities 255,600 Bonds payable 251,000 Total liabilities 506,600 Stockholders' equity: Common stock 719,400 Retained earnings 127, 100 Total stockholders' equity 846,500 Total liabilities and stockholders' equity $1,353,100 $ 53,400 232,100 206,200 35,400 527, 100 205,000 767,000 195, 100 571,900 $1,304,000 $ 248, 700 18,400 47,500 314,600 134,000 448,600 685,000 170, 400 855,400 $1,304,000 Rusco Company Income Statement For This Year Ended July 31 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of investments $28,500 Loss on sale of equipment (9,400) Income before taxes Income taxes Net income $1,140,000 712,500 427,500 304,950 122,550 19,100 141,650 42,410 $ 99,240 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 $57,600. The equipment originally cost $124,000 and had accumulated depreciation of $57,000. c. Long-term investments that cost $64,000 were sold during the year for $92,500. 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. 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 expenses Adjustments to a cash basis: Income taxes Adjustments to a cash basis: 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 the Year Ended July 31, 2014 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 Comparative financial statements for Weaver Company follow: Weaver Company Comparative Balance Sheet at December 31 This Year Last Year 30 in uno $1,321 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Long-term investments Total assets Liabilities and Stockholders' Equity Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 430 $ 305 90 81 368 450 85 535 535 $1,498 $1,321 $910 505 405 Weaver Company Income Statement For This Year Ended December 31 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of investments Loss on sale of equipment Income before taxes Income taxes Net income $ 112 During this year, Weaver sold some equipment for $13 that had cost $52 and on which there was accumulated depreciation of $33. In addition, the company sold long-term investments for $56 that had cost $48 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $82 of its own stock. This year Weaver did not retire any bonds. Required: 1. Using the direct method, adjust the company's income statement for this year to a cash basis. 2. Using the information obtained in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year. 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.) Weaver 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 Using the information obtained in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year. (Cash outflows and amounts to be deducted should be indicated with a minus sign.).... Weaver Company Statement of Cash Flows For This Year Ended December 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