Mary Walker, president of Rusco Company, considers $41,000 to be the minimum cas

Question

Mary Walker, president of Rusco Company, considers $41,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $36,000 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.

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.)

  

Compute free cash flow for 2015. (Negative amount should be indicated by a minus sign.)

Rusco Company
Comparative Balance Sheet
July 31, 2015 and 2014 2015 2014   Assets   Current assets:      Cash $ 36,000    $ 58,200         Accounts Receivable 225,200    237,300         Inventory 268,900    208,600         Prepaid expenses 21,700    40,200      Total current assets 551,800    544,300      Long-term investments 153,000    225,000      Plant and equipment 902,000    771,000         Less accumulated depreciation 220,500    196,300      Net plant and equipment 681,500    574,700      Total assets
$ 1,386,300    $ 1,344,000      Liabilities and Stockholders' Equity   Current liabilities:      Accounts payable $ 193,900    $ 253,100         Accrued liabilities 10,100    19,200      Income taxes payable 58,800    49,500      Total current liabilities 262,800    321,800      Bonds Payable 263,000    0      Total liabilities 525,800    321,800      Stockholders’ equity:      Common stock 735,000    705,000         Retained earnings 125,500    317,200      Total stockholders' equity 860,500    1,022,200   
  Total liabilities and stockholders' equity $ 1,386,300    $ 1,344,000   

Explanation / Answer

1.

2.

3.

Rusco Company Cash Flow Statement   For the year ended July 31, 2015 Cash flows from operating activities Net Income $ 106,120 Adjustment to reconcile net income to: Depreciation expense $   85,200 220500-196300+61000 Gain on sale of investment $ (30,500) Loss on sale of equipment $   10,200 Decrease in accounts receivable $   12,100 237300-225200 Increase in inventory $ (60,300) 208600-268900 Decrease in prepaid expenses $   18,500 40200-21700 Decrease in accounts payable $ (59,200) 193900-253100 Decrease in accrued payable $   (9,100) 10100-19200 Increase in Incometax payable $      9,300 58800-49500 $ (23,800) Net cash flow from operating activities $    82,320

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