Mary Walker, president of Rusco Company, considers $36,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $31,000 in 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	$	31,000	$	52,200
Accounts receivable		219,200		230,800
Inventory		264,400		205,600
Prepaid expenses		18,200		34,200
Total current assets		532,800		522,800
Long-term investments		138,000		200,000
Plant and equipment		892,000		766,000
Less accumulated depreciation		218,000		194,800
Net plant and equipment		674,000		571,200
Total assets	$	1,344,800	$	1,294,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	189,400	$	247,600
Accrued liabilities		9,600		18,200
Income taxes payable		54,800		47,000
Total current liabilities		253,800		312,800
Bonds payable		248,000		132,000
Total liabilities		501,800		444,800
Stockholders equity:
Common stock		635,000		680,000
Retained earnings		208,000		169,200
Total stockholders' equity		843,000		849,200
Total liabilities and stockholders' equity	$	1,344,800	$	1,294,000

Rusco Company Income Statement For the Year Ended July 31, 2014
Sales		$	1,120,000
Cost of goods sold			700,000
Gross margin			420,000
Selling and administrative expenses			299,600
Net operating income			120,400
Nonoperating items:
Gain on sale of investments	$28,000
Loss on sale of equipment	(9,200)		18,800
Income before taxes			139,200
Income taxes			41,680
Net income		$	97,520

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 $56,800. The equipment had originally cost $122,000 and had accumulated depreciation of $56,000.
c.	Long-term investments that had cost $62,000 were sold during the year for $90,000.
d.	The company did not retire any bonds payable or repurchase any of its common stock.

Because the Cash account decreased so dramatically during 2014, 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 2014 to a cash basis. (Adjustment amounts that are to be deducted should be indicated with a minus sign.)

Using the data from (1) above and other data from the problem as needed, prepare a statement of cash flows for 2014. (Cash outflows and amounts to be deducted should be indicated with a minus sign.)