U. U case provided by oper ang activities of SISO in the prior veur (all numbers are stated in millions). Prepare a memo that summarizes your interpretations of bu krizes your interpretations of Bursess's financial performance. PROBLEM 14-13 Pre 014-2, LO14-3 Prepare and interpreta Statement of Cash Flows: Free Cash Flow LO14-1, Mary Walker, president of president of Rusco Comany considers $14,000 to be the minimum cash balance for operating purposes. As S. As can be seen from the following statements, only $8,000 in cash was avail- able at the end of this year. Since the m any 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 A M Year The -300 goo 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 $ 8.000 120.000 140.000 5.000 273.000 50,000 430,000 60.000 370,000 $693.000 $ 21.000 80.000 90,000 9.000 200.000 70.000 300,000 50.000 250.000 $520,000 -- 20000 + 130,000 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..... $123,000 8,000 20,000 151,000 70.000 221,000 $60.000 H D 17.000 12.000 tooo 89.000 89.000 290 346,000 85.000 366.000 106.000 472,000 $693,000 431.000 $520,000 Ruson Company Income Statemon For This Year Ende July 31 $500,000 300.000 200.000 158.000 42.000 and deve Sales Cost of goods sold... Gross margin... Seling and administrative expenses Net operating income ... Nonoperating items: Gain on sale of investments Loss on sale of equipment. income before taxes .. on the $10.000 2.000) 8,000 50,000 20.000 $ 30,000 Income taxes.. Net Income Chapter 14 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 $8.000. The equipment originally cost $20,000 and had accumulated depreciation of $10,000. c. Long-term investments that cost $20,000 were sold during the year for $30,000. 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 operating activities for this year. 2. Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for this year. 3. Compute free cash flow for this year. 4. Explain the major reasons for the decline in the company's cash balance
