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	$ 42,000	$ 65,400
Accounts Receivable	257,800	245,100
Inventory	274,300	212,200
Prepaid expenses	25,900	47,400
Total current assets	600,000	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	$ 1,461,500	$ 1,404,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 259,700	$ 180,400
Accrued liabilities	10,700	20,400
Income taxes payable	63,600	52,500
Total current liabilities	334,000	253,300
Bonds Payable	281,000	154,000
Total liabilities	615,000	407,300
Stockholders equity:
Common stock	807,500	735,000
Retained earnings	39,000	261,700
Total stockholders' equity	846,500	996,700
Total liabilities and stockholders' equity	$ 1,461,500	$ 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.

The company declared and paid a cash dividend.

Equipment was sold during the year for $65,600. The equipment originally cost $144,000 and had accumulated depreciation of $67,000.

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

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. (List any deduction in cash and cash outflows as negative amounts.)

Rusco Company
Statement of Cash FlowsIndirect Method (partial)
Net income
		0
		$0

2.

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

Rusco Company
Statement of Cash Flows
For This Year Ended July 31
Operating activities:
Investing activities:
		0
Financing activities:
		0
		0
Beginning cash and cash equivalents
Ending cash and cash equivalents		$0

3.

Compute free cash flow for this year. (Negative amount should be indicated by a minus sign.)

Free cash flow