Item4 10 points eBook References Check my work Check My Work button is now enabled1Item 4Item 4 10 points Mary Walker, president of Rusco Company, considers $27,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $22,000 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 This Year Last Year Assets Current assets: Cash and cash equivalents $ 22,000 $ 41,400 Accounts receivable 208,400 219,100 Inventory 256,300 200,200 Prepaid expenses 11,900 23,400 Total current assets 498,600 484,100 Long-term investments 111,000 155,000 Plant and equipment 874,000 757,000 Less accumulated depreciation 213,500 192,100 Net plant and equipment 660,500 564,900 Total assets $ 1,270,100 $ 1,204,000 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 181,300 $ 237,700 Accrued liabilities 8,700 16,400 Income taxes payable 47,600 42,500 Total current liabilities 237,600 296,600 Bonds payable 221,000 114,000 Total liabilities 458,600 410,600 Stockholders equity: Common stock 663,100 635,000 Retained earnings 148,400 158,400 Total stockholders' equity 811,500 793,400 Total liabilities and stockholders' equity $ 1,270,100 $ 1,204,000

Rusco Company Income Statement For This Year Ended July 31 Sales $ 940,000 Cost of goods sold 587,500 Gross margin 352,500 Selling and administrative expenses 251,450 Net operating income 101,050 Nonoperating items: Gain on sale of investments $ 23,500 Loss on sale of equipment (7,400 ) 16,100 Income before taxes 117,150 Income taxes 35,110 Net income $ 82,040

The following additional information is available for this year.

The company declared and paid a cash dividend. Equipment was sold during the year for $49,600. The equipment originally cost $104,000 and had accumulated depreciation of $47,000.

Long-term investments that cost $44,000 were sold during the year for $67,500.

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 companys executive committee is anxious to see how the income statement would appear on a cash basis.

Required:

1. Using the direct method, adjust the companys 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.

2)