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. Last Year Rusco Company Comparative Balance Sheet at July 31 This Year Assets Current assets: Cash and cash equivalents $ 16,000 Accounts receivable 201,200 Inventory 250,900 Prepaid expenses 7,700 Total current assets 475,800 Long-term investments 93,000 Plant and equipment 862,000 Less accumulated depreciation 210,500 Net plant and equipment 651,500 Total assets $1,220,300 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 175,900 Accrued liabilities 8,100 Income taxes payable 42,800 Total current liabilities 226,800 Bonds payable 203,000 Total liabilities 429,800 Stockholders' equity: Common stock 621,800 Retained earnings 168, 700 Total stockholders' equity 790,500 Total liabilities and stockholders' equity $1,220,300 $ 34,200 211,300 196,600 16,200 458,300 125,000 751,000 190,300 560, 700 $1,144,000 $ 231,100 15, 200 39,500 285,800 102,000 387,800 605,000 151,200 756,200 $1,144,000 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 $20,500 Loss on sale of equipment (6,200) Income before taxes Income taxes Net income $ 820,000 512,500 307,500 219,350 88,150 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. 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. Required 1 Required 2 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 Sales $ 83,010 Adjustments to a cash basis: Decrease in accounts receivable 10,100 Depreciation 93,110 Adjustments to a cash basis: 0 Selling and administrative expenses Adjustments to a cash basis: 0 Income taxes Adjustments to a cash basis: 0 $ 93,110 Required 1 Required 2 Required 2 Using the data from (1avove, 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 This Year Ended July 31 Operating activities: Cash received from customers Less cash disbursements for: Total cash disbursements 0 0 Investing activities: 0 Financing activities: Statement of Cash Flows For This Year Ended July 31 Operating activities: Cash received from customers Less cash disbursements for: Total cash disbursements 0 0 Investing activities: 0 Financing activities: 0 0 Beginning cash and cash equivalents Ending cash and cash equivalents $ 0