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Mary Walker, president of Rusco Company, considers $37,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements,

Mary Walker, president of Rusco Company, considers $37,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $32,000 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 $ 32,000 $ 53,400
Accounts Receivable 243,800 232,100
Inventory 265,300 206,200
Prepaid expenses 18,900 35,400
Total current assets 560,000 527,100
Long-term investments 141,000 205,000
Plant and equipment 894,000 767,000
Less accumulated depreciation 218,500 195,100
Net plant and equipment 675,500 571,900
Total assets $ 1,376,500 $ 1,304,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 248,700 $ 178,400
Accrued liabilities 9,700 18,400
Income taxes payable 55,600 47,500
Total current liabilities 314,000 244,300
Bonds Payable 251,000 134,000
Total liabilities 565,000 378,300
Stockholders equity:
Common stock 732,500 685,000
Retained earnings 79,000 240,700
Total stockholders' equity 811,500 925,700
Total liabilities and stockholders' equity $ 1,376,500 $ 1,304,000

Rusco Company Income Statement For This Year Ended July 31
Sales $ 1,140,000
Cost of goods sold 712,500
Gross margin 427,500
Selling and administrative expenses 304,950
Net operating income 122,550
Nonoperating items:
Gain on sale of investments $ 28,500
Loss on sale of equipment (9,400) 19,100
Income before taxes 141,650
Income taxes 42,410
Net income $ 99,240

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 $57,600. The equipment originally cost $124,000 and had accumulated depreciation of $57,000.
  3. Long-term investments that cost $64,000 were sold during the year for $92,500.
  4. 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.

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