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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,

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.

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