Mary Walker, president of Rusco Company, considers $21,000 to be the minimum cas

Question

Mary Walker, president of Rusco Company, considers $21,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $16,000 in cash was available at the end of 2015. 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
Income Statement
For the Year Ended July 31, 2015

Using the indirect method, compute the net cash provided by operating activities for 2015. (Negative amount should be indicated by a minus sign.)

Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for 2015. (List any deduction in cash and cash outflows as negative amounts.)

Rusco Company
Income Statement
For the Year Ended July 31, 2015

  Sales $ 820,000       Cost of goods sold 512,500       Gross margin 307,500       Selling and administrative expenses 219,350       Net operating income 88,150       Nonoperating items:      Gain on sale of investments $20,500      Loss on sale of equipment (6,200) 14,300       Income before taxes 102,450       Income taxes 30,730       Net income $ 71,720    

Explanation / Answer

1.Net Cash Flow from Operating Activities

67650   

Cash From Operating Activities Particulars Amount ($) Net Operating Income 88150 Adjustments Gain from sale of Long Terrm Investment -20500 Net cash provided by Operating Activities

67650   

2. Rusco Company Cash Flow Statement Year Ending 2015 Particulars Particulars Amount ($) Amount ($) Opening Cash Balance 21000 Net Income 88150 Cash Flow from Operating Activities -51230 Adjustments Gain from sale of Long Term Investments (given) -20500 Income Tax -30730 Cash Flow from Investment Activities 136800 Adjustments Proceeds from sale of equipment 44800 Proceeds from sale of Long Term Investment 92000 Cash Flow from Financing Activities (Balancing figure) 178720 Adjustments Dividends Paid Issue of Bonds and Common stock Closing Cash Balance 16000 Note:- 1 Gain from sale of Investment, cosidered from given data 2 Loss from sale of Equipment, Considered from given data 3 Since the previous period information is not available, that was not considred 4 As it is mentioned in the Question, minimum cash balance to be maintined is $21000, it is taken as Opening cash Balance 5 Neither Divivded paid in cash nor data relating to bond issued value is not available in the given the given question consolidated value for the Financing activities is considered 6 Since the dieffered tax balance is not available complete tax componenet is considered in Operating Acitivities

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