Mary Walker, president of Rusco Company, considers $29,000 to be the minimum cas

Question

Mary Walker, president of Rusco Company, considers $29,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $24,000in cash was available at the end of 2014. 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.

Using the indirect method, compute the net cash for operating activities for 2014. (Negative amount should be indicated by a minus sign.)

Prepare a statement of cash flows for 2014. (List any deduction in cash and cash outflows as negative amounts.)

Compute free cash flow for 2014. (Negative amount should be indicated by a minus sign.)

Mary Walker, president of Rusco Company, considers $29,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $24,000in cash was available at the end of 2014. 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.

Explanation / Answer

1)

Cash flow from operating activities Amount net Income 85480 Adjustments to convert net income to cash basis Gain on sale of investmenst -24500 Loss on sale of equipment 7800 Decrease in accounts receivables 10900 Increase in inventory -56700 Decrease in Prepaid expenses 12500 Depreciation Expense * Refer note 70800 Decrease in Accounts Payable -56800 Decrease in Accrued Liabilities -7900 Iincrease in Income tax payble 5700 -38200 Net cash flow from operating activities 47280 Note Accumulated depreciation at beginning 192700 Less: Acumulated depreciation on equipment sold 49000 Adjusted Balance in Acccumulated depreciation 143700 accumulated depreciation at end 214500 Less: adjusted balance in accumulated depreciation 143700 depreciation expense for year 70800

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