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Mary Walker, president of Rusco Company, considers $31.000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $26,000 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 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: Cowon stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 26,089 213,200 259,900 14,700 513,800 123,800 882,000 215,509 666,500 $1.303,300 $ 46,200 224,300 202,600 28, 289 501,380 175,eee 761.089 193,300 567.709 $1,244,600 $ 184,900 9.100 50,809 244,800 233,000 477,800 242,100 17,200 44,500 303,800 122,000 425, 800 675,200 150, 100 325,500 $1,303,300 655,000 163,200 818,200 $1,244.000 Lommon stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity b/5,200 150,300 825,500 $1,303,300 b55,00 163,200 818.200 $1,244,090 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 $25,500 Loss on sale of equipment (8,280) Income before taxes Income taxes Net income $1,020,888 637,500 382,500 272,850 109,650 17,300 126,95 38,630 88.920 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 $52.800. The equipment originally cost $112.000 and had accumulated depreciation of $51,000 c. Long-term investments that cost $52,000 were sold during the year for $77,500 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 it above and other data from the problem as needed prepare a statement of cash flows for this veat 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 0 Investing activities: Financing activities: Beginning cash and cash equivalents Ending cash and cash equivalents
