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Mary Walker, president of Rusco Company, considers $41,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements,

Mary Walker, president of Rusco Company, considers $41,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $36,000in 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 $ 36,000 $ 58,200
Accounts Receivable 225,200 237,300
Inventory 268,900 208,600
Prepaid expenses 21,700 40,200

Total current assets 551,800 544,300

Long-term investments 153,000 225,000

Plant and equipment 902,000 771,000
Less accumulated depreciation 220,500 196,300

Net plant and equipment 681,500 574,700

Total assets $ 1,386,300 $ 1,344,000

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 193,900 $ 253,100
Accrued liabilities 10,100 19,200
Income taxes payable 58,800 49,500

Total current liabilities 262,800 321,800
Bonds Payable 263,000 142,000

Total liabilities 525,800 463,800

Stockholders equity:
Common stock 647,500 705,000
Retained earnings 213,000 175,200

Total stockholders' equity 860,500 880,200

Total liabilities and stockholders' equity $ 1,386,300 $ 1,344,000

Rusco Company Income Statement For the Year Ended July 31, 2014
Sales $ 1,220,000
Cost of goods sold 762,500

Gross margin 457,500
Selling and administrative expenses 326,350

Net operating income 131,150
Nonoperating items:
Gain on sale of investments $30,500
Loss on sale of equipment (10,200) 20,300

Income before taxes 151,450
Income taxes 45,330

Net income $ 106,120

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 $60,800. The equipment had originally cost $132,000 and had accumulated depreciation of $61,000.
c. Long-term investments that had cost $72,000 were sold during the year for $102,500.
d. 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 for operating activities for 2014. (Negative amount should be indicated by a minus sign.)

2.

Prepare a statement of cash flows for 2014. (List any deduction in cash and cash outflows as negative amounts.)

3.

Compute free cash flow for 2014.

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