Mary Walker, president of Rusco Company, considers $$35,000$ to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $$30,000$ 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 $ $30,000$ $ $51,000$

Accounts Receivable $241,000229,500$

Inventory $263,500205,000$

Prepaid expenses $17,50033,000$

Total current assets $552,000518,500$

Long$-$term investments $135,000195,000$

Plant and equipment $890,000765,000$

Less accumulated depreciation $217,500194,500$

Net plant and equipment $672,500570,500$

Total assets $ $1,359,500$ $ $1,284,000$

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ $246,500$ $ $178,000$

Accrued liabilities $9,50018,000$

Income taxes payable $54,00046,500$

Total current liabilities $310,000242,500$

Bonds Payable $245,000130,000$

Total liabilities $555,000372,500$

Stockholders$$ equity:

Common stock $717,500675,000$

Retained earnings $87,000236,500$

Total stockholders' equity $804,500911,500$

Total liabilities and stockholders' equity $ $1,359,500$ $ $1,284,000$

Rusco Company

Income Statement

For This Year Ended July $31$

Sales $ $1,100,000$

Cost of goods sold $687,500$

Gross margin $412,500$

Selling and administrative expenses $294,250$

Net operating income $118,250$

Nonoperating items:

Gain on sale of investments $ $27,500$

Loss on sale of equipment $(9,000)18,500$

Income before taxes $136,750$

Income taxes $40,950$

Net income $ $95,800$

The following additional information is available for this year.

The company declared and paid a cash dividend.

Equipment was sold during the year for $$56,000.$ The equipment originally cost $$120,000$ and had accumulated depreciation of $$55,000.$

Long$-$term investments that cost $$60,000$ were sold during the year for $$87,500.$

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.