Problem 13-13 (Algo) Prepare and Interpret a Statement of Cash Flows; Free Cash Flow [LO13-1, LO13-2, LO13-3] Mary Walker, president of Rusco Company, considers $37,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $32,000 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 Assets Current assets: Cash Accounts Receivable This Year Last Year $ 32,000 243,800 $ 53,400 232,100 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 Sales Cost of goods sold Gross margin Rusco Company Income Statement For This Year Ended July 31 Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of investments Loss on sale of equipment Income before taxes Income taxes Net income 206,200 265,300 18,900 35,400 560,000 527,100 141,000 205,000 894,000 767,000 218,500 195,100 675,500 571,900 $ 1,376,500 $ 1,304,000 $ 248,700 $ 178,400 9,700 18,400 55,600 47,500 314,000 244,300 251,000 134,000 565,000 378,300 732,500 685,000 79,000 240,700 811,500 925,700 $ 1,376,500 $ 1,304,000 $ 1,140,000 712,500 427,500 304,950 122,550 $ 28,500 (9,400) 19,100 141,650 42,410 $ 99,240 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 $57,600. The equipment originally cost $124,000 and had accumulated depreciation of $57,000. c. Long-term investments that cost $64,000 were sold during the year for $92,500. 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 Flows-Indirect Method (partial) Net income $ 99,240 Adjustments to convert net income to a cash basis: Depreciation $ 80,400 Gain on sale of investments (28,500) Loss on sale of equipment 9,400 Increase in accounts receivable (11,700) Increase in inventory (59,100) Decrease in prepaid expenses 16,500 Increase in accounts payable 70,300 Decrease in accrued liabilities (8,700) Increase in income taxes payable 8,100 Net cash provided by operating activities 76,700 $ 175,940 a. The company declared and paid a cash dividend. b. Equipment was sold during the year for $57,600. The equipment originally cost $124,000 and had accumulated depreciation of $57,000. c. Long-term investments that cost $64,000 were sold during the year for $92,500. 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 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: Net cash used in investing activities Financing activities: $ 251,000 57,600 92,500 $ 175,940 401,100 0 577,040 Beginning cash and cash equivalents Ending cash and cash equivalents $ 577,040 Sales Cost of goods sold Gross margin Rusco Company Income Statement For This Year Ended July 31 Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of investments Loss on sale of equipment Income before taxes Income taxes Net income $ 1,140,000 712,500 427,500 304,950 122,550 $ 28,500 (9,400) 19,100 The following additional information is available for this year. a. The company declared and paid a cash dividend. 141,650 42,410 $ 99,240 b. Equipment was sold during the year for $57,600. The equipment originally cost $124,000 and had accumulated depreciation of $57,000. c. Long-term investments that cost $64,000 were sold during the year for $92,500. 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 Compute free cash flow for this year. (Negative amount should be indicated by a minus sign.) Free cash flow < Required 2 Required 3 >