Mary Walker, president of Rusco Company, considers $29,000 to be the minimum cash balance for operating...
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Mary Walker, president of Rusco Company, considers $29,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $24,000 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 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 $ 43,800 221,780 201,400 $ 24,000 232,600 258,100 13,300 25,880 528,000 492,700 117,000 165,000 878,000 759,000 192,700 566,300 214,500 663,500 $ 1,308,500 $ 1,224,000 $ 239,900 8,900 $ 176,800 Income taxes payable Total current liabilities Bonds Payable Total liabilities Stockholders' equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Rusco Company Income Statement For This Year Ended July 31 Sales Cost of goods sold 16,880 49,200 43,500 298,000 237,180 227,000 118,000 525.000 355,100 672,500 645,000 111,000 223,980 783,500 868,900 $ 1,388,500 $ 1,224,000 $980,000 612,500 367,500 Gross margin Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of investments Loss on sale of equipment Income before taxes Income taxes Net income 262,150 105,350 $ 24,500 (7,880) The following additional information is available for this year. a. The company declared and paid a cash dividend. 16,700 122,050 36,570 $ 85,480 b. Equipment was sold during the year for $51,200. The equipment originally cost $108,000 and had accumulated depreciation of $49,000. c. Long-term investments that cost $48,000 were sold during the year for $72,500. 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. Mary Walker, president of Rusco Company, considers $29,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $24,000 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 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 $ 43,800 221,780 201,400 $ 24,000 232,600 258,100 13,300 25,880 528,000 492,700 117,000 165,000 878,000 759,000 192,700 566,300 214,500 663,500 $ 1,308,500 $ 1,224,000 $ 239,900 8,900 $ 176,800 Income taxes payable Total current liabilities Bonds Payable Total liabilities Stockholders' equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Rusco Company Income Statement For This Year Ended July 31 Sales Cost of goods sold 16,880 49,200 43,500 298,000 237,180 227,000 118,000 525.000 355,100 672,500 645,000 111,000 223,980 783,500 868,900 $ 1,388,500 $ 1,224,000 $980,000 612,500 367,500 Gross margin Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of investments Loss on sale of equipment Income before taxes Income taxes Net income 262,150 105,350 $ 24,500 (7,880) The following additional information is available for this year. a. The company declared and paid a cash dividend. 16,700 122,050 36,570 $ 85,480 b. Equipment was sold during the year for $51,200. The equipment originally cost $108,000 and had accumulated depreciation of $49,000. c. Long-term investments that cost $48,000 were sold during the year for $72,500. 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.
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