Problem 13A-5 Prepare and Interpret a Statement of Cash Flows [LO13-1, LO13-4) Mary Walker, president of Rusco Company, considers $34,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $29,000 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 29,000 216,809 262,609 16,880 525,209 132,000 888,000 217,000 671,000 $1,328,209 $ 49,800 228,200 284,400 31,800 514,200 190,000 764,000 194,200 569,860 $1,274,000 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, $ $ 187,600 9,400 53,200 250,200 242,000 492,200 245,400 17.800 46,000 309,280 128,000 437,200 702,700 133,300 836,000 $1,328,200 670,000 166,800 836,800 $1,274,000 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 $27,000 Loss on sale of equipment (8,800) Income before taxes Income taxes Net income $1,080,00 675,000 405,009 288,989 116,109 18,280 134.300 40,220 90.00 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 $55,200. The equipment originally cost $118.000 and had accumulated depreciation of $54,000. c. Long-term investments that cost $58,000 were sold during the year for $85,000. 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