Mary Walker, president of Rusco Company, considers $27,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $22,000 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 $ 22,000 $ 41,400 Accounts receivable 208,400 219,100 Inventory 256,300 200,200 Prepaid expenses 11,900 23,400 Total current assets 498, 600 484,100 Long-term investments 111,000 155,000 plant and equipment 874,000 757,000 Less accumulated depreciation 213,500 192, 100 Net plant and equipment 660,500 564,900 Total assets $1,270, 100 $1,204,000 Liabilities and Stockholders' Equity Current abilities Accounts payable 5 181.100 $ 237,700 Accrued liabilities 8,700 10.400 Income taxes payable 47,600 427500 Total current abilities 237.680 296.600 Bonds payable 221,000 114.000 Total shilities 450.500 410.600 Stockholders' equity Connon stock 66), 100 635.000 Retained earnings 1411,400 158,00 Check 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 181,300 8,700 47.600 237,600 221,000 458,600 $ 237,700 16,400 42,500 296,600 114,000 410,600 663, 100 148,400 811,500 $1,270, 100 635,000 158,400 793,480 $1,204,000 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 $23,500 LOSS on sale of equipment 7.490) Income before taxes Income taxes Net income $940,000 587,500 352,508 251,450 101,050 16.100 117,150 35, 110 $82,040 The following ariditinnal inform lable for this 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 $49,600. The equipment originally cost $104,000 and had accumulated depreciation of $47000. c. Long-term investments that cost $44.000 were sold during the year for $67,500. 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. Complete this question by entering your answers in the tabs below. Rusco Company Direct Method of Determining the Net Cash flows from Operating activities Adjustments to a cash basis: 0 Adjustments to a cash basis: 0 Selling and administrative expenses Adjustments to a cash basis: 0 Income taxes Adjustments to a cash basis Oo $ 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 Financing activities my work VIEVE GERES Less cash disbursements for Total cash disbursements 0 0 Investing activities 0 Financing activities 0 Beginning cash and cash equivalents Ending cash and cash ents $ 0