Problem 13-13 Prepare and Interpret a Statement of Cash Flows; Free Cash Flow (L013-1, LO13-2, L013- 3) Mary Walker, president of Rusco Company, considers $14,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $8,000 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 decline in cash is puzzling to Ms. Walker Rusco Company Comparative Balance Sheet at July 31 This Year Last Year Assets Current assets: Cash and cash equivalents $ 8,000 $ 21,000 Accounts receivable 120,000 80,000 Inventory 140,000 99,000 Prepaid expenses 5,888 9,000 Total current assets 273,000 200.000 Long-term investments 50,000 78,000 plant and equipment 430,000 300,000 Less accumulated depretation 68,000 50,000 Net plant and equipment 370.000 250.000 Total assets $693,800 $520,000 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $123,000 $ 60,000 Accrued liabilities 8,000 17,000 Income taxes payable 20.000 12.000 Total current liabilities 151,000 89,000 Bonds payable 70.000 Total Liabilities 221,080 89,000 Stockholders' equity! Common stock 366,00 346,000 89,000 151,080 70,000 221,000 89,000 Total current liabilities Bonds payable Total liabilities Stockholders' equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 366,000 106,000 472,000 $693,000 346,000 85,000 431,000 $520,000 RUSCO Company Income Statement For This Year Ended July 31 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating itens: Goin on sale of investments $10,000 Loss on sale of equipment (2.000) Income before taxes Income taxes Net Income $500,000 300,000 200,000 158,000 42,080 8,000 50,000 20,000 $ 30,000 The following additional information is available for this year, a. The company declared and paid a cash dividend b. Equipment was sold during the year for $8,000 The equipment originally cost $20,000 and had accumulated depreciation of $10,000 Long-term investments that cost $20,000 were sold during the year for $30,000 The romany did not retire any hans navale orren hace any of its rommen stark c. Long-term investments that cost $20,000 were sold during the year for $30,000 d. The company did not retire any bonds payable or repurchase any of its common stock 1 Required: 1. Using the indirect method, compute the net cash provided by used in operating activities for this year. 2. Prepare a statement of cash flows for this year 3. Compute free cash flow for this year 15 Dot Complete this question by entering your answers in the tabs below. References Required: Required 2 Required Prepare a statement of cash flows for this year. (Ustany deduction in cash and cash outhows as negative amounts) Rusco Company State tent of Cash Flows For This Your Ended July 11 Operating activities Not cash provided by operating activities Investing activities Proceeds from sale of long term investments Proceeds from sale of equipment Gain on sale of equipment Additions to plant and equipment Net cash used in investing activities Required 1 Required 2 Required 1 Prepare a statement of cash flows for this year. (List any deduction in cash and cash outflows as negative amounts) 15 points Rusco Company Statement of Cash Flows Far This Year Ended July 31 Operating activities Net cash provided by operating activities Investing activities Proceeds from sale of long-term investments Proceeds from sale of equipment Gain on sale of equipment Additions to plant and equipment Net canh used in investing activities Financing activities issuance of bonds payable Issuance of common stock Cash dividends paid 0 0 0 Notash used in finanong activities Net decrease in cash and cash equivalents Beginning cash and cash equivalente Ending hand cash equivalent 5 0 Required 1 Required 2 Required 3 1 Using the indirect method, compute the net cash provided by/used in operating activities for this year. (List any deduction in cash outflows as negative amounts.) 15 points Prim Reference Rusco Company Statement of Cash Flows-Indirect Method (partial Net income Adjustments to convert net income to a cash basis: Increase in accounts receivable Increase in inventory Decrease in prepaid expenses Decrease in accounts payable Decrease in accrued abilities Decrease in income taxes payable Loss on sale of equipment Gain on sale of investments Depreciation Net cash provided by operating activities Required 2 > Required: 1. Using the indirect method, compute the net cash provided by used in operating activities for this year. 2. Prepare a statement of cash flows for this year. 3. Compute free cash flow for this year. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute free cash now for this year. (Negative amount should be indicated by a minus sign) Pro cash now