Mary Walker, president of Rusco Company, considers $25,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $20,000 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 $ 20,000 227,000 254,500 10,500 512,000 105,000 870,000 212,500 657,500 $1,274,500 $ 39,000 216,500 199,000 21,000 475,500 145,000 755,000 191,500 563,500 $1,184,000 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 to come taxes payable Total current liabilities Bonds Payable Total liabilities Stockholders' equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ $ 235,500 8,500 46,000 290,000 215,000 505,000 176,000 16,000 41,500 233,500 110,000 343,500 642,500 127,000 769,500 $1,274,500 625,000 215,500 840,500 $1,184,000 Rusco Company Income Statement For This Year Ended July 31 Sales Cost of goods sold Gross margin Selline and administrative evnensee $900,000 562,500 337,500 240.750 $900,000 562,500 337,500 240, 750 96,750 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 $22,500 Loss on sale of equipment (7,000) Income before taxes Income taxes Net income 15,500 112,250 33,650 $ 78,600 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 $48,000. The equipment originally cost $100,000 and had accumulated depreciation of $45,000. c. Long-term investments that cost $40,000 were sold during the year for $62,500. 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. X Answer is not complete. Required 1 Required 2 Required 3 Using the indirect method, compute the net cash provided by/used in operating activities for this year. (List any deduction cash and cash outflows as negative amounts.) $ 78,600 Rusco Company Statement of Cash FlowsIndirect Method (partial) Net income Adjustments to convert contribution margin to a cash X basis: Depreciation $ 66,000 Loss on sale of equipment 7,000 Gain on sale of investments (22,500) Increase in accounts receivable (10,500) Increase in inventory (55,500) Decrease prepaid expenses Increase in accounts payable 59,500 Decrease in accrued liabilities (7,500) Increase in income taxes payable 4,500 ooOOOOOO OOOOOO 51,500 $ 130,100 Net cash provided by operating activities > Required 1 Required 2 Required 3 Prepare a statement of cash flows for this year. (List any deduction in cash and cash outflows as negative amoun Rusco Company Statement of Cash Flows 130,100 For This Year Ended July 31 Operating activities: Net cash provided by operating activities $ Investing activities: Additions to plant and equipment 48,000 X Proceeds from sale of equipment (215,000) Loss on sale of investments x (167,000) Net cash provided by investing activities Financing activities: Issuance of bonds payable Issuance of common stock Cash dividends paid 0 (36,900) Beginning cash and cash equivalents Ending cash and cash equivalents $ (36,900) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute free cash flow for this year. (Negative amount should be indicated by a minus sign.) Free cash flow