Refer to the financial statements for Rusco Products in Problem 15—11. Because the Cash account decreased so dramatically during 2009, 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 2009 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 2009.

3. Briefly explain the major reasons for the sharp decline in cash during the year.