Mary Walker, president of Rusco Company, considers $49,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $44,000 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 TA TA 44,000 260,600 276,100 27,300 608,000 177,000 918,000 224,500 693,500 $1,478,500 67,800 247,700 213,400 49,800 578,700 65,000 779,000 198,700 580,300 $1,424,000 Assets Current assets: Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Total current assets Long-term investments Plant and equipment Less accumulated depreciation Net plant and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds Payable Total liabilities Stockholders' equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 261,900 10,900 65,200 338,000 287,000 625,000 $ 180,800 20,800 53,500 255, 100 158,000 413, 100 822,500 31,000 853,500 $1,478,500 745,000 265,900 1,010,900 $1,424,000 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: Gain on sale of investments $ 34,500 Loss on sale of equipment (11,800) Income before taxes Income taxes Net income $1,380,000 862,500 517,500 369, 150 148,350 22,700 171,050 51,170 $ 119,880 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 $67,200. The equipment originally cost $148,000 and had accumulated depreciation of $69,000. c. Long-term investments that cost $88,000 were sold during the year for $122,500. d. 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 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 Adjustments to convert net income to a cash basis: Depreciation Gain on sale of investments Loss on sale of equipment Increase in accounts receivable Increase in inventory Decrease in prepaid expenses Decrease in accounts payable Decrease in accrued liabilities Increase in income taxes payable 0 Net cash provided by operating activities S 0 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 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: Net cash provided by operating activities Investing activities: Gain on sale of equipment Gain on sale of investments Decrease in accounts payable 0 Financing activities: 0 0 Beginning cash and cash equivalents Ending cash and cash equivalents S Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute free cash flow for this year. (Negative amount should be indicated by a minus sign.) Free cash flow
