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Question

Edit Vew HistoryBookmarks Tools Window Help Help Save &Exit; Submit nework 1 6 8 Problem 14-13 Prepare and Interpret a Statement of Cash Flows; Free Cash Flow [LO14-1, LO14-2, L014-3 Mary Walker, president of Rusco Company, considers $29,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $24,000 in cash was avallable 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 Coegarative Ralance Sheet at July 31 24,00D43,800 232,600 Prepaid expenses o0g-term inveatments Set plant and equipment Liabilities and Stockholders Equity 664 depre aton 214,500 1,308,500 1,224, 0e Current iabili 239.900 176,8d Total eurreat 1sabi1ities MacBook Pro 5 8 ????40

Explanation / Answer

Solution for Requirement 1 : Computation of Cash flows provided by/used in Operating Activities using Indirect Method.

Rusco Company

Cashflow Statement - Indirect Method.

Net Income 85480

Adjustment to reconcile net income to net cash provided by operating activities:

Add : Depreciation on Fixed Assets = 21800 ( Current year accumulated dep - Prev years')

(i.e 214500-192700)  

Add : Non- operating loss on selling eqp= 7800

Less : Non-operating gain on sale of inv. (24500)

Adjusted net income =   90580

Add : Decrease in current asset-

Prepaid Expenses 12500

Less : Increase in current assets-

Accounts Receivable (10900)

Inventories (56700)

Add : Increase in current liabilities

Accounts Payable 63100

Income Tax Payable 5700

Less : Decrease in current Liabilities

Accrued Liabilities (7900)

Net Cash Flows from Operating Actv. = 96380

Solution for Requirement 2 : Statement of Cashflows for this year

Rusco Company

Cashflow Statement - Indirect Method

For this year ended on July 31

Net Cash Flows from Operating Activities 96380

(as calculated above)

Cash Flows from Investing Activities-

- Sale of Investments = 72500

-Purchase of Equipment = (119000)

- Sale of equipment = 51200 4700

Cash Flows from Financing Activities-

- Increase in common stock = 27500

- Declaration of dividend = (112900) (85400)

Net Increase/(decrease) in cash = 15680

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