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	$	39,000		$	61,800
Accounts Receivable		253,600			241,200
Inventory		271,600			210,400
Prepaid expenses		23,800			43,800
Total current assets		588,000			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	$	1,436,000		$	1,374,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	256,400		$	179,800
Accrued liabilities		10,400			19,800
Income taxes payable		61,200			51,000
Total current liabilities		328,000			250,600
Bonds Payable		272,000			148,000
Total liabilities		600,000			398,600
Stockholders equity:
Common stock		785,000			720,000
Retained earnings		51,000			255,400
Total stockholders' equity		836,000			975,400
Total liabilities and stockholders' equity	$	1,436,000		$	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.

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.