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 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 16,000 221,400 250,900 7,700 496,000 93,000 862,000 210,500 651,500 $1,240, 500 $ 34,200 211,300 196,600 16,200 458,300 125,000 751,000 190,300 560, 700 $1,144,000 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 $ 231, 100 8,100 42,800 282,000 203,000 485,000 $ 175,200 15,200 39,500 229,900 102,000 331,900 612,500 143,000 755,500 $1,240, 500 605,000 207,100 812, 100 $1,144,000 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 Loss on sale of equipment Income before taxes Income taxes Net income $820,000 512,500 307,500 219,350 88,150 $20,500 (6,200) 14,300 102,450 30,730 $ 71,720 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 $44,800. The equipment originally cost $92,000 and had accumulated depreciation of $41,000. C. Long-term investments that 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/used in operating activities for this year. 2. Prepare a statement of cash flows for this year. 3. Compute free cash flow for this year. Rusco Company Statement of Cash Flows-Indirect Method (partial) $ Rusco Company Statement of Cash Flows For This Year Ended July 31 Operating activities: Investing activities: 0 Financing activities: 0 0 Beginning cash and cash equivalents Ending cash and cash equivalents $ 0
