Question
Mary Walker, president of Rusco Company, considers $21,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements,
Mary Walker, president of Rusco Company, considers $21,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $16,000 in cash was available at the end of 2015. 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 Income Statement For the Year Ended July 31, 2015 | |||
Sales | $ | 820,000 | |
Cost of goods sold | 512,500 | ||
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Gross margin | 307,500 | ||
Selling and administrative expenses | 219,350 | ||
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Net operating income | 88,150 | ||
Nonoperating items: | |||
Gain on sale of investments | $20,500 | ||
Loss on sale of equipment | (6,200) | 14,300 | |
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Income before taxes | 102,450 | ||
Income taxes | 30,730 | ||
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Net income | $ | 71,720 | |
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The following additional information is available for the year 2015. |
a. | The company declared and paid a cash dividend. |
b. | Equipment was sold during the year for $44,800. The equipment had originally cost $92,000 and had accumulated depreciation of $41,000. |
c. | Long-term investments that had cost $32,000 were sold during the year for $52,500. |
d. | The company did not retire any bonds payable or repurchase any of its common stock. |
Required: | |
1. | Using the indirect method, compute the net cash provided by operating activities for 2015. (Negative amount should be indicated by a minus sign.) |
2. | Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for 2015. (List any deduction in cash and cash outflows as negative amounts.) |
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