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
Assets
Current assets:
Cash	$ 44,000	$ 67,800
Accounts Receivable	260,600	247,700
Inventory	276,100	213,400
Prepaid expenses	27,300	49,800
Total current assets	608,000	578,700
Long-term investments	177,000	265,000
Plant and equipment	918,000	779,000
Less accumulated depreciation	224,500	198,700
Net plant and equipment	693,500	580,300
Total assets	$ 1,478,500	$ 1,424,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 261,900	$ 180,800
Accrued liabilities	10,900	20,800
Income taxes payable	65,200	53,500
Total current liabilities	338,000	255,100
Bonds Payable	287,000	158,000
Total liabilities	625,000	413,100
Stockholders equity:
Common stock	822,500	745,000
Retained earnings	31,000	265,900
Total stockholders' equity	853,500	1,010,900
Total liabilities and stockholders' equity	$ 1,478,500	$ 1,424,000

Rusco Company Income Statement For This Year Ended July 31
Sales		$ 1,380,000
Cost of goods sold		862,500
Gross margin		517,500
Selling and administrative expenses		369,150
Net operating income		148,350
Nonoperating items:
Gain on sale of investments	$ 34,500
Loss on sale of equipment	(11,800)	22,700
Income before taxes		171,050
Income taxes		51,170
Net income		$ 119,880

The following additional information is available for this year.

The company declared and paid a cash dividend.

Equipment was sold during the year for $67,200. The equipment originally cost $148,000 and had accumulated depreciation of $69,000.

Long-term investments that cost $88,000 were sold during the year for $122,500.

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.

2. Prepare a statement of cash flows for this year.

3. Compute free cash flow for this year.