Mary Walker, president of Rusco Company, considers $30,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $25,000 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	$	25,000		$	45,000
Accounts Receivable		234,000			223,000
Inventory		259,000			202,000
Prepaid expenses		14,000			27,000
Total current assets		532,000			497,000
Long-term investments		120,000			170,000
Plant and equipment		880,000			760,000
Less accumulated depreciation		215,000			193,000
Net plant and equipment		665,000			567,000
Total assets	$	1,317,000		$	1,234,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	241,000		$	177,000
Accrued liabilities		9,000			17,000
Income taxes payable		50,000			44,000
Total current liabilities		300,000			238,000
Bonds Payable		230,000			120,000
Total liabilities		530,000			358,000
Stockholders equity:
Common stock		680,000			650,000
Retained earnings		107,000			226,000
Total stockholders' equity		787,000			876,000
Total liabilities and stockholders' equity	$	1,317,000		$	1,234,000

Rusco Company Income Statement For This Year Ended July 31
Sales					$	1,000,000
Cost of goods sold						625,000
Gross margin						375,000
Selling and administrative expenses						267,500
Net operating income						107,500
Nonoperating items:
Gain on sale of investments	$	25,000
Loss on sale of equipment		(8,000	)			17,000
Income before taxes						124,500
Income taxes						37,300
Net income					$	87,200

The following additional information is available for this year.

The company declared and paid a cash dividend.

Equipment was sold during the year for $52,000. The equipment originally cost $110,000 and had accumulated depreciation of $50,000.

Long-term investments that cost $50,000 were sold during the year for $75,000.

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.