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 $ 19,000 204,800 253,600 9,800 487,200 102,000 868,000 212.000 656.6ea $1,245,200 $ 37,800 215.20 198,4ee 19.800 471,200 140,000 754,000 191.200 5 62. sea $1,174,000 Assets Current assets: Cash and cash equivalents 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 $ 3 178,600 8,400 45,200 232,200 212,000 444,200 $ 234,400 15,800 41.000 291,200 188,000 399,200 635,500 165,500 801,000 $1,245, 200 620,000 154,800 774,800 $1,174,000 Rusco Company Income Statement For This Year Ended July 31 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operatine income Nonoperating items: Gain on sale of investments Loss on sale of equipment Income before taxes. Income taxes Net income $800.000 550.800 330,000 235.483 94,600 $22,000 (6,880) 15,200 109.see 32.928 $ 76.885 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 $47,200. The equipment originally cost $98,000 and had accumulated depreciation of $44,000. C. Long-term investments that cost $38,000 were sold during the year for $60,000. 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. 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 Adjustments to a cash basis: Adjustments to a cash basis: Selling and administrative expenses Adjustments to a cash basis: Income taxes Adjustments to a cash basis: $ 0 Using the data from (1) above, 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 Investing activities: Financing activities: Beginning cash and cash equivalents Ending cash and cash equivalents
