Question

Mary Walker, president of Rusco Company, considers $36,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $31.000 in cash was available at the end of this year. Since the company reported a large net income for the year, and also issued both bonds and common stock the sharp decine in cash puzzling to Ma Walker Rusco Company Comparative Balance Sheet at July 31 This Year Last Year Accounts receivable nuntory Prepaid expo Total current assets Long-tere Investments plant and out Le l ated BE clation Totalts Lalities and stockholders alty S247.50 Accounts payable Acord lates Bands Total stockholders' quity Commy Income State For This Year Ended July 31 Costos sold Selling and dinistrative expenses ut operating income Cain on sale of instants Los on sale of equipment The following aditional Informations available for this year. The company declared and paid a cash dividend b. Equipment was sold during the year for $56,900. The equipment originally cost $122.000 and had accumulated depreciation of $56.000. Long-term investments that cost $62.000 were sold during the year for $90,000 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 committees 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 this year to a cash bags 2. Using the data from IT above and other data from the problemos needed, prepare a statement of cash flows for this year Complete this question by entering your answers in the tabs below. Red Ruined Using the direct method, adut the company's income statement for this year to a cash basis. Aument amounts that are to be deducted should be indicated with a minus sign) Rus Company Direct Method of Determining the Net Cash flows from Operating activities Required 2 >

Answer 1

1.

Rusco Company
Direct Method of Determining the Net Cash flows from Operating activities
Sales	1120000
Adjustments to a cash basis:
Decrease in accounts receivable	11600
Cash received from customers		1131600
Cost of goods sold	700000
Adjustments to a cash basis:
Increase in inventory	58800
Decrease in accounts payable	58200
Cash disbursements for inventory purchases		817000
Selling and administrative expenses	299600
Adjustments to a cash basis:
Depreciation expense [$218000 - ($194800 - $56000)]	-79200
Decrease in prepaid expenses	-16000
Decrease in accrued liabilities	8600
Cash disbursements for selling and administrative expenses		213000
Income taxes	41680
Adjustments to a cash basis:
Increase in income taxes payable	-7800
Cash disbursements for income taxes		33880
Net cash provided by operating activities		67720

2.

Rusco Company
Statement of Cash Flows
For the Year Ended July 31, 2014
Operating activities:
Cash received from customers	1131600
Less cash disbursements for:
Inventory purchases	-817000
Selling and administrative expenses	-213000
Income taxes	-33880
Total cash disbursements	-1063880
Net cash provided by operating activities		67720
Investing activities:
Sale proceeds from equipment	56800
Sale proceeds from long-term investments	90000
Purchase of equipment [$892000 - ($766000 - $122000)]	-248000
Net cash used for investing activities		-101200
Financing activities:
Issuance of bonds payable	116000
Issuance of common stock	18800
Payment of cash dividends ($169200 + $97520 - $144200)	-122520
Net cash provided by financing activities		12280
Net decrease in cash		-21200
Beginning cash and cash equivalents		52200
Ending cash and cash equivalents		31000