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		$	65,400
Accounts receivable		232,400			245,100
Inventory		274,300			212,200
Prepaid expenses		25,900			47,400
Total current assets		574,600			570,100
Long-term investments		171,000			255,000
Plant and equipment		914,000			777,000
Less accumulated depreciation		223,500			198,100
Net plant and equipment		690,500			578,900
Total assets	$	1,436,100		$	1,404,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	199,300		$	259,700
Accrued liabilities		10,700			20,400
Income taxes payable		63,600			52,500
Total current liabilities		273,600			332,600
Bonds payable		281,000			134,000
Total liabilities		554,600			466,600
Stockholders equity:
Common stock		764,000			735,000
Retained earnings		117,500			202,400
Total stockholders' equity		881,500			937,400
Total liabilities and stockholders' equity	$	1,436,100		$	1,404,000

Rusco Company Income Statement For This Year Ended July 31
Sales					$	1,340,000
Cost of goods sold						837,500
Gross margin						502,500
Selling and administrative expenses						358,450
Net operating income						144,050
Nonoperating items:
Gain on sale of investments	$	33,500
Loss on sale of equipment		(11,400	)			22,100
Income before taxes						166,150
Income taxes						49,710
Net income					$	116,440

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 $65,600. The equipment originally cost $144,000 and had accumulated depreciation of $67,000.

3. Long-term investments that cost $84,000 were sold during the year for $117,500.

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.

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:

(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