Question
Mary Walker, president of Rusco Company, considers $14,000 to be the minimum cash balance for operating purposes. As can be seen from the following
Mary Walker, president of Rusco Company, considers $14,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $8,000 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. Assets Current assets: Rusco Company Comparative Balance Sheet at July 31 This Year Last Year Cash Accounts receivable Inventory Prepaid expenses Total current assets Long-term investments Plant and equipment $ 8,000 120,000 $ 21,000 80,000 140,000 5,000 273,000 50,000 90,000 9,000 200,000 70,000 430,000 300,000 Less accumulated depreciation 60,000 50,000 Net plant and equipment 370,000 250,000 Total assets $693,000 $520,000 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $123,000 $ 60,000 Accrued liabilities 8,000 17,000 Income taxes payable 20,000 12,000 Total current liabilities Bonds payable Total liabilities Stockholders' equity: Common stock 151,000 89,000 70,000 0 221,000 89,000 366,000 346,000 Retained earnings 106,000 85,000 Total stockholders' equity 472,000 431,000 Total liabilities and stockholders' equity $693,000 $520,000
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