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Mary Walker, president of Rusco Company, considers $44,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements,

Mary Walker, president of Rusco Company, considers $44,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $39,000 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 $ 39,000 $ 61,800
Accounts receivable 228,800 241,200
Inventory 271,600 210,400
Prepaid expenses 23,800 43,800
Total current assets 563,200 557,200
Long-term investments 162,000 240,000
Plant and equipment 908,000 774,000
Less accumulated depreciation 222,000 197,200
Net plant and equipment 686,000 576,800
Total assets $ 1,411,200 $ 1,374,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 196,600 $ 256,400
Accrued liabilities 10,400 19,800
Income taxes payable 61,200 51,000
Total current liabilities 268,200 327,200
Bonds payable 272,000 128,000
Total liabilities 540,200 455,200
Stockholders equity:
Common stock 742,800 720,000
Retained earnings 128,200 198,800
Total stockholders' equity 871,000 918,800
Total liabilities and stockholders' equity $ 1,411,200 $ 1,374,000

Rusco Company Income Statement For This Year Ended July 31
Sales $ 1,280,000
Cost of goods sold 800,000
Gross margin 480,000
Selling and administrative expenses 342,400
Net operating income 137,600
Nonoperating items:
Gain on sale of investments $ 32,000
Loss on sale of equipment (10,800 ) 21,200
Income before taxes 158,800
Income taxes 47,520
Net income $ 111,280

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 $63,200. The equipment originally cost $138,000 and had accumulated depreciation of $64,000.

  3. Long-term investments that cost $78,000 were sold during the year for $110,000.

  4. 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 companys executive committee is anxious to see how the income statement would appear on a cash basis.

Required:

1. Using the direct method, adjust the companys 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.

Apex Company prepared the statement of cash flows for the current year that is shown below:

Apex Company Statement of Cash FlowsIndirect Method
Operating activities:
Net income $ 40,700
Adjustments to convert net income to cash basis:
Depreciation $ 21,200
Increase in accounts receivable (62,000 )
Increase in inventory (26,000 )
Decrease in prepaid expenses 11,000
Increase in accounts payable 54,800
Decrease in accrued liabilities (10,900 )
Increase in income taxes payable 4,300 (7,600 )
Net cash provided by (used in) operating activities 33,100
Investing activities:
Proceeds from the sale of equipment 15,200
Loan to Thomas Company (40,900 )
Additions to plant and equipment (120,300 )
Net cash provided by (used in) investing activities (146,000 )
Financing activities:
Increase in bonds payable 88,700
Increase in common stock 39,200
Cash dividends (28,400 )
Net cash provided by (used in) financing activities 99,500
Net decrease in cash and cash equivalents (13,400 )
Beginning cash and cash equivalents 28,400
Ending cash and cash equivalents $ 15,000

Required:

Compute Apex Companys free cash flow for the current year. (Negative amount should be indicated by a minus sign.)

For the just completed year, Hanna Company had net income of $46,000. Balances in the companys current asset and current liability accounts at the beginning and end of the year were as follows:

December 31

End of Year Beginning of Year
Current assets:
Cash and cash equivalents $ 60,000 $ 79,000
Accounts receivable $ 162,000 $ 190,000
Inventory $ 430,000 $ 361,000
Prepaid expenses $ 12,500 $ 13,500
Current liabilities:
Accounts payable $ 360,000 $ 382,000
Accrued liabilities $ 8,000 $ 13,000
Income taxes payable $ 36,000 $ 25,000

The Accumulated Depreciation account had total credits of $50,000 during the year. Hanna Company did not record any gains or losses during the year.

Required:

Using the indirect method, determine the net cash provided by operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.)

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