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Using the direct method, adjust the companys income statement for this year to a cash basis. Using the data from Requirement 1, and other data
- Using the direct method, adjust the companys income statement for this year to a cash basis.
- Using the data from Requirement 1, and other data from the problem as needed, prepare a statement of cash flows for this year.
Mary Walker, president of Rusco Company, considers $14,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $8,000 in cash was available at the end of this year. Because 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. \begin{tabular}{lrr} Liabilities and Stockholders ' Equity & \\ Current liabilities: & $123,000 & $60,000 \\ Accounts payable & 8,000 & 17,000 \\ Accrued liabilities & 20,000 & 12,000 \\ Income taxes payable & 151,000 & 89,000 \\ Total current liabilities & 70,000 & 0 \\ Bonds payable & 221,000 & 89,000 \\ Total liabilities & & \\ Stockholders' equity: & 366,000 & 346,000 \\ Common stock & 106,000 & 85,000 \\ \hline Retained earnings & 472,000 & 431,000 \\ \hline Total stockholders' equity & $693,000 & $520,000 \\ \hline Total liabilities and stockholders' equity & \end{tabular} The following additional information is available for this year. a. The company paid a cash dividend. b. Equipment costing $20,000 with accumulated depreciation of $10,000 was sold for $8,000. c. Long-term investments costing $20,000 were sold for $30,000. 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
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