Mary Walker, president of Rusco Company, considers $50,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $45,000 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 Accounts receivable 45,e00 236,000 277,e00 28,e00 586,000 180,e00 920,000 225,e00 695,e00 $1,461,ee0 69,000 249,000 214,000 51,000 583,000 270,000 780, 00 199,000 Inventory Prepaid expenses Total current assets Long-term investments Plant and equipment Less accumulated depreciation Net plant and equipment nces 581,000 $1,434,000 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 $ 202,000 11,e00 66,00e 279,000 290,080 569,00e $ 263,000 21,000 54,000 338,000 140,00e 478,eee 778,10e 113,900 892,000 750,000 206,000 956,000 $1,461,000 $1,434,000 Rusco Company Income Statement For This Year Ended July 31 $1,400,e00 Sales 875,000 Cost of goods sold Gross margin Selling and administrative 525,000 374,580 expenses Net operating income 150,500 Nonoperating items: $ 35,000 (12,000) Gain on sale of investments Loss on sale of equipment 23,000 173,500 51,900 $ 121,600 Income before taxes Income taxes Net income 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 $68.000. The equipment originally cost $150,000 and had accumulated depreciation of $70.000. c. Long-term investments that cost $90.000 were sold during the year for $125,00o 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 Complete this question by enterina vour answers in the tahe halow Required 2 Required 1 Using the direct method, adjust the company's income statement for this year to a cash basis. (Adjustment amounts that are to be deducted should be indicated with a minus sign.) Rusco Company Direct Method of Determining the Net Cash Flows from Operating Activities Dok Adjustments to a cash besis: int rences Adjustments toa cash basis: Seling and administrative expenses Adjustments to a oash basis 0 Income taces Adjustments to a cash basis Required 2
