HELP ***Please note this is for direct method*** Mary Walker, president of Rusco
ID: 2584071 • Letter: H
Question
HELP ***Please note this is for direct method***
Mary Walker, president of Rusco Company, considers $43,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $38,000 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. The following additional information is available for the year 2015.
a. The company declared and paid a cash dividend.
b. Equipment was sold during the year for $62,400. The equipment had originally cost $136,000 and had accumulated depreciation of $63,000.
c. Long-term investments that had cost $76,000 were sold during the year for $107,500.
d. The company did not retire any bonds payable or repurchase any of its common stock. Because the Cash account decreased so dramatically during 2015, the company’s executive committee is anxious to see how the income statement would appear on a cash basis. Required:
1. Using the direct method, adjust the company’s income statement for 2015 to a cash basis.
2. Using the data from (1) above and other data from the problem as needed, prepare a statement of cash flows for 2015.
Explanation / Answer
Income statement under cash basis
Sale of equipment =$62,400
Sale of investment =$1,07,500
Total income =$1,69,900
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.