Mary Walker, president of Rusco Company, considers $26,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $21,000 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 21,000 207,200 255,400 11, 200 494,800 108,000 872,000 213,000 659,000 $1,261,800 $ 40,200 217,800 199,600 22,200 479,800 150,000 756,000 191,800 564,200 $1,194,000 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 $ 180,400 8,600 46,800 235,800 218,000 453,800 $ 236,600 16,200 42,000 294,800 112,000 406,800 650,400 157,600 808,000 $1,261,800 630,000 157,200 787,200 $1,194,000 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 Loss on sale of equipment Income before taxes Income taxes Net income $920,000 575,000 345,000 246,100 98,900 $23,000 (7,200) 15,800 114,700 34,380 $ 80,320 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 $48,800. The equipment originally cost $102,000 and had accumulated depreciation of $46,000. C. Long-term investments that cost $42,000 were sold during the year for $65,000. 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. 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 entering your answers in the tabs below. Required 1 Required 2 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 Adjustments to a cash basis: Adjustments to a cash basis: Selling and administrative expenses Adjustments to a cash basis: Income taxes Adjustments to a cash basis: Required 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for this year. (Cash outflows and amounts to be deducted should be indicated with a minus sign.) 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 Investing activities: Financing activities