Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Mary Walker, president of Rusco Company, considers $40,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements,
Mary Walker, president of Rusco Company, considers $40,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $35,000 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 $ 35,000 224.000 288.000 21.000 548.000 150.000 900.000 220.000 680.000 $1,378,000 $ 57.000 236.000 208.000 39.000 540.000 220.000 770,000 196.000 574.000 $1,334.000 Assets Current assets: Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Total current assets Long-term investments Plant and equipment Less accumulated depreciation Net plant and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Stockholders' equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 193.000 10.000 58.000 281.000 280.000 521.000 $ 252.000 19.000 49.000 320.000 120.000 440.000 729.400 127.600 857.000 $1,378,000 700.000 194.000 894.000 $1,334.000 Rusco Company Income Statement For This Year Ended July 31 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of investments Loss on sale of equipment Income before taxes Income taxes Net income $1,200.000 750.000 450.000 321.000 129.000 $ 30.000 (10.000) 20.000 149.000 44.600 104,400 $ The following additional information is available for this year. a. The company declared and paid a cash dividend b. Equipment was sold during the year for $60,000. The equipment originally cost $130,000 and had accumulated depreciation of $60,000. c. Long-term investments that cost $70.000 were sold during the year for S100,000 d. The company did not retire any bonds payable or repurchase any of its common stock Because the Cash account decreased so dramatically during this year, the company's executive committee is anxious to see how the income statement would appear on a cash basis. Required: 1. Using the direct method, adjust the company's 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. Required: 1. Using the direct method, adjust the company's 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Using the direct method, adjust the company's income statement for this year to a cash basis. (Adjustment amounts that are to be deducted should be indicated with a minus sign.) 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: 01 Required 1 Required 2 Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for this year. (Cash outflows and amounts to be deducted should be indicated with a minus sign.) Rusco Company Statement of Cash Flows For This Year Ended July 31 Operating activities: Cash received from customers Less cash disbursements for: Total cash disbursements Investing activities: Financing activities: Beginning cash and cash equivalents Ending cash and cash equivalents
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started