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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,

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 $25,000in cash was available at the end of 2014. 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 July 31, 2014 and 2013
2014 2013
Assets
Current assets:
Cash $ 25,000 $ 45,000
Accounts Receivable 212,000 223,000
Inventory 259,000 202,000
Prepaid expenses 14,000 27,000

Total current assets 510,000 497,000

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 $ 1,295,000 $ 1,234,000

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 184,000 $ 241,000
Accrued liabilities 9,000 17,000
Income taxes payable 50,000 44,000

Total current liabilities 243,000 302,000
Bonds Payable 230,000 120,000

Total liabilities 473,000 422,000

Stockholders equity:
Common stock 620,000 650,000
Retained earnings 202,000 162,000

Total stockholders' equity 822,000 812,000

Total liabilities and stockholders' equity $ 1,295,000 $ 1,234,000

Rusco Company Income Statement For the Year Ended July 31, 2014
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 the year 2014.
a. The company declared and paid a cash dividend.
b. Equipment was sold during the year for $52,000. The equipment had originally cost $110,000 and had accumulated depreciation of $50,000.
c. Long-term investments that had cost $50,000 were sold during the year for $75,000.
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 for operating activities for 2014. (Negative amount should be indicated by a minus sign.)

2.

Prepare a statement of cash flows for 2014. (List any deduction in cash and cash outflows as negative amounts.)

3.

Compute free cash flow for 2014. (Negative amount should be indicated by a minus sign.)

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