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C O Not secure ezto mheducation.com/hm pxtodo c15SinglePrintView&singleQuestionNo1 g Problem 14-13 Prepare and Interpret a Statement of Cash Flows; Free Cash Flow [L014-1, LO14-2, LO14-3] Mary Walker, president of Rusco Company, considers $45.000 to be the minimum cash balance for operating purposes. As can be seen from the follovwing statements, cnly $4 a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ma Walker 0,000 in cash was available at the end of this year. Since the company reported Rusco Company Comparalive Balance Sheet at July 31 This Year Year Current assets: 40,000 255,000 272,500 24 500 63000 242.500 211,000 45,000 Cash Accounts Receivable Prepaid expenses Total current assets Plant and equipment Net plant and equipment 775.000 500197 500 910,000 687.500 $1,444 500 1384,000 Total assets Liabilities and Stockholders Equity Current liablities 257,500 180,000 20.000 Accounts payable 10,500 62,000 Accrued lablites $1,500 Income taxos payable Total current labilities Bonds Payable Total liabiities Stockholders equity 275.000 150,000 792,500 725.000 Common stock Retained eamings Total stockholders' equity Total liabilities and stockholdors equity 830,500982 500 1,444,500 $1.384,000 Income 3iatement For This Year Ended July 31 Sales Cost of goods sold $1,300.000 812.500 Gross margn Selling and adrministrative expenses Net operating inoome 347.750 $ 32.500 Gain on sale of investments Loss on sale of equipment 111.c0D) 21.500 48 250 S 113,000 Income before taxes Net income The folowing additional information is avalable for this year a. The company declared and paid a cash dividend. b. Equipment was sold during the year for $64,000 The equipment originally cost $140,000 and had accumulated depreciation of $65,000 c. Long-term investments that cost $80.000 were sold duling the year for $112,500. 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 bylused in operating activities for this year 2 Prepare a statement of cash fows for this year 3 Compute free cash flow for this year Complete this question by entering your answers in the tabs belowExplanation / Answer
Cash flows from operating activities: Net income for the year 113000 Adjustment for reconciliation gain on sale of Investment -32500 loss on sale of equipment 11000 Depreciation (197500-65000-222500) 90000 Increase in Accounts receivable -12500 increase in Inventory -61500 Decrease in Prepaid expense 20500 Increase in Accounts payable 77500 Decrease in Accrued liabilities -9500 Increase in Income tax payable 10500 Net cash provided from operating activities 206500 Statement of cash flows: Cash flows from operating activities: Net income for the year 113000 Adjustment for reconciliation gain on sale of Investment -32500 loss on sale of equipment 11000 Depreciation (197500-65000-222500) 90000 Increase in Accounts receivable -12500 increase in Inventory -61500 Decrease in Prepaid expense 20500 Increase in Accounts payable 77500 Decrease in Accrued liabilities -9500 Increase in Income tax payable 10500 Net cash provided from operating activities 206500 Cash flows from Investing activities: Sale of Equipment 64000 Sale of investment 112500 Purchase of plant (775000-140000-910000) -275000 Net cash used in investing activities -98500 Cash flows from Financing activities: Dividend paid (257500+113000-47000) -323500 Issue of Bonds payable 125000 Issue of common stock 67500 Net cash used in financing activities -131000 Net decrease in cash -23000 Beginning balance of cash 63000 Ending balance of cash 40000 Free cash flows: Cash provided from Operating activities 206500 Less: Cash used in investing activities 98500 Free cash flows: 108000
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