Problem 14-13 Prepare and Interpret a Statement of Cash Flows; Free Cash Flow [LO14-1, LO14-2, LO14- 3] Mary Walker, president of Rusco Company, considers $30,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $25,000 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 $ 25,000 45,000 223,000 202,000 27,000 532,000497,000 170,000 760,000 215,000193,000 665,000 Accounts Receivable 234,000 259,000 14,000 Inventory Prepaid expenses Total current assets Long-term investments Plant and equipment 120,000 880,000 Less accumulated depreciation Net plant and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: 567,000 $1,234,000 $1,317,000 Accounts payable $ 241,000 9,000 50,000 300,000 230,000 530,000 $ 177,000 17,000 44,000 238,000 120,000 358,000 Accrued liabilities Income taxes payable Total current liabilities Bonds Payable Total liabilities Stockholders' equity: 650,000 107,000226,000 787,000 876,000 $1,234,000 680,000 Common stock Retained earnings Total stockholders equity Total liabilities and stockholders' equity $1,317,000 Rusco Company Income Statement ForThis Year Ended July 31 $1,000,000 625,000 375,000 267,500 107,500 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of investments $25,000 (8,000) Loss on sale of equipment Income before taxes Income taxes Net income 17,000 124,500 37,300 $87,200 The following additional information is available for this year. a. The company declared and paid a cash dividend D. Equipment was sold during the year for $52,000. The equipment originally cost $110,000 and had accumulated depreciation of $50,000 C. Long-term investments that cost $50,000 were sold during the year for $75,000 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. Required 1Required 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) Required 1Required 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 Financing activities Beginning cash and cash equivalents Ending cash and cash equivalents Required 1Required 2 Required 3 Compute free cash flow for this year. (Negative amount should be indicated by a minus sign.) Free cash flow