Mary Walker, president of Rusco Company, considers $24,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $19,000 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 $ 19,000 $ 37,800 Accounts receivable 204,800 215,200 Inventory 253,600 198,400 Prepaid expenses 9,800 19,800 Total current assets 487,200 471,200 Long-term investments 102,000 140,000 Plant and equipment 868,000 754,000 Less accumulated depreciation 212,000 191,200 Net plant and equipment 656,000 562,800 Total assets $ 1,245,200 $ 1,174,000 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 178,600 $ 234,400 Accrued liabilities 8,400 15,800 Income taxes payable 45,200 41,000 Total current liabilities 232,200 291,200 Bonds payable 212,000 108,000 Total liabilities 444,200 399,200 Stockholders equity: Common stock 635,500 620,000 Retained earnings 165,500 154,800 Total stockholders' equity 801,000 774,800 Total liabilities and stockholders' equity $ 1,245,200 $ 1,174,000 Rusco Company Income Statement For This Year Ended July 31 Sales $ 880,000 Cost of goods sold 550,000 Gross margin 330,000 Selling and administrative expenses 235,400 Net operating income 94,600 Nonoperating items: Gain on sale of investments $ 22,000 Loss on sale of equipment (6,800 ) 15,200 Income before taxes 109,800 Income taxes 32,920 Net income $ 76,880 The following additional information is available for this year. The company declared and paid a cash dividend. Equipment was sold during the year for $47,200. The equipment originally cost $98,000 and had accumulated depreciation of $44,000. Long-term investments that cost $38,000 were sold during the year for $60,000. 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.