Mary Walker, president of Rusco Company, considers $38,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $33,000 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 and cash equivalents	$	33,000		$	54,600
Accounts receivable		245,200			233,400
Inventory		266,200			206,800
Prepaid expenses		19,600			36,600
Total current assets		564,000			531,400
Long-term investments		144,000			210,000
Plant and equipment		896,000			768,000
Less accumulated depreciation		219,000			195,400
Net plant and equipment		677,000			572,600
Total assets	$	1,385,000		$	1,314,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	249,800		$	178,600
Accrued liabilities		9,800			18,600
Income taxes payable		56,400			48,000
Total current liabilities		316,000			245,200
Bonds Payable		254,000			136,000
Total liabilities		570,000			381,200
Stockholders equity:
Common stock		740,000			690,000
Retained earnings		75,000			242,800
Total stockholders' equity		815,000			932,800
Total liabilities and stockholders' equity	$	1,385,000		$	1,314,000

Rusco Company Income Statement For This Year Ended July 31
Sales					$	1,160,000
Cost of goods sold						725,000
Gross margin						435,000
Selling and administrative expenses						310,300
Net operating income						124,700
Nonoperating items:
Gain on sale of investments	$	29,000
Loss on sale of equipment		(9,600	)			19,400
Income before taxes						144,100
Income taxes						43,140
Net income					$	100,960

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 $58,400. The equipment originally cost $126,000 and had accumulated depreciation of $58,000.
3. Long-term investments that cost $66,000 were sold during the year for $95,000.
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.