Problem 12-13A Prepare and Interpret a Statement of Cash Flows; Free Cash Flow [LO12-1, LO12-2, LO12-3]

Mary Walker, president of Rusco Company, considers $38,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $33,000 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.

Rusco Company Comparative Balance Sheet July 31, 2015 and 2014
	2015		2014
Assets
Current assets:
Cash	$	33,000	$	54,600
Accounts Receivable		221,600		233,400
Inventory		266,200		206,800
Prepaid expenses		19,600		36,600
Total current assets		540,400		531,400
Long-term investments		144,000		210,000
Plant and equipment		896,000		768,000
Less accumulated depreciation		219,000		195,400
Net plant and equipment		677,000		572,600
Total assets	$	1,361,400	$	1,314,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	191,200	$	249,800
Accrued liabilities		9,800		18,600
Income taxes payable		56,400		48,000
Total current liabilities		257,400		316,400
Bonds Payable		254,000		0
Total liabilities		511,400		316,400
Stockholders equity:
Common stock		717,000		690,000
Retained earnings		133,000		307,600
Total stockholders' equity		850,000		997,600
Total liabilities and stockholders' equity	$	1,361,400	$	1,314,000

Rusco Company Income Statement For the Year Ended July 31, 2015
Sales		$	1,160,000
Cost of goods sold			725,000
Gross margin			435,000
Selling and administrative expenses			310,300
Net operating income			124,700
Nonoperating items:
Gain on sale of investments	$29,000
Loss on sale of equipment	(9,600)		19,400
Income before taxes			144,100
Income taxes			43,140
Net income		$	100,960

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 $58,400. The equipment had originally cost $126,000 and had accumulated depreciation of $58,000.
c.	Long-term investments that had cost $66,000 were sold during the year for $95,000.
d.	The company did not retire any bonds payable or repurchase any of its common stock.

Required:
1.	Using the indirect method, compute the net cash provided by operating activities for 2015. (Negative amount should be indicated by a minus sign.)

2.	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.)

Rusco Company

Statement of Cash Flows - Indirect Method

For the year ended July 31,2015

Operating activities:
Adjustments to convert net income to cash basis:
Investing activities:
Financing activities:
Beginning Cash and Cash equivalents
Ending cash and cash equivalents

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

Free cash flow