Mary Walker, president of Rusco Company, considers $33,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $28,000 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	$	28,000		$	48,600
Accounts receivable		215,600			226,900
Inventory		261,700			203,800
Prepaid expenses		16,100			30,600
Total current assets		521,400			509,900
Long-term investments		129,000			185,000
Plant and equipment		886,000			763,000
Less accumulated depreciation		216,500			193,900
Net plant and equipment		669,500			569,100
Total assets	$	1,319,900		$	1,264,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	186,700		$	244,300
Accrued liabilities		9,300			17,600
Income taxes payable		52,400			45,500
Total current liabilities		248,400			307,400
Bonds payable		239,000			126,000
Total liabilities		487,400			433,400
Stockholders equity:
Common stock		680,100			665,000
Retained earnings		152,400			165,600
Total stockholders' equity		832,500			830,600
Total liabilities and stockholders' equity	$	1,319,900		$	1,264,000

Rusco Company Income Statement For This Year Ended July 31
Sales					$	1,060,000
Cost of goods sold						662,500
Gross margin						397,500
Selling and administrative expenses						283,550
Net operating income						113,950
Nonoperating items:
Gain on sale of investments	$	26,500
Loss on sale of equipment		(8,600	)			17,900
Income before taxes						131,850
Income taxes						39,490
Net income					$	92,360

The following additional information is available for this year.

1. The company declared and paid a cash dividend.

2. Equipment was sold during the year for $54,400. The equipment originally cost $116,000 and had accumulated depreciation of $53,000.

3. Long-term investments that cost $56,000 were sold during the year for $82,500.

4. 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 companys executive committee is anxious to see how the income statement would appear on a cash basis.

Required:

1. Using the direct method, adjust the companys 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.

Rusco Company Direct Method of Determining the Net Cash flows from Operating activities Adjustments to a cash basis Adjustments to a cash basis: Selling and administrative expenses Adjustments to a cash basis: Income taxes Adjustments to a cash basis: Required Required 2 Statement of Cash Flows For the Year Ended July 31, 2014 Operating activities: Cash received from customers Less cash disbursements Total cash disbursements Investing activities Financing activities: Beginning cash and cash equivalents Ending cash and cash equivalents