Mary Walker, president of Rusco Company, considers $47,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $42,000 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 $42,000 232,400 274,300 $65,400 245,100 212,200 Accounts receivable Inventory 25,900 474 574,600- Prepaid expenses Total current assets Long-term investment:s Plant and equipment 570,100 171,000255,000 777,000 223,500198,100 690,500578,900 $1,404,000 914,000 Less accumulated depreciation Net plant and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: $1,436,100 Accounts payable $ 199,300 10,700 63,600 273,600 $ 259,700 20,400 52,500 332,600 281,000134,000 466,600 Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Stockholders' equity: 554,600 764,000 117,500 881,500 $1,436,100 Common stock 735,000 202,400 937,400 $1,404,000 Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 930_ 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: $1,340,000 837,500 502,500 358,450 144,050 33,500 (11,400) Gain on sale of investments Loss on sale of equipment Income before taxes Income taxes Net income 22,100 166,150 49,710 116,440 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 $65,600. The equipment originally cost $144,000 and had accumulated depreciation of $67,000 c. Long-term investments that cost $84,000 were sold during the year for $117,500 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