Rusco Company Comparative Balance Sheet July 31, 2014 and 2013 2014 2013 Assets
ID: 2480988 • Letter: R
Question
Rusco Company
Comparative Balance Sheet
July 31, 2014 and 2013
2014 2013
Assets
Current assets:
Cash $ 16,000 $ 34,200
Accounts Receivable 201,200 211,300
Inventory 250,900 196,600
Prepaid expenses 7,700 16,200
Total current assets 475,800 458,300
Long-term investments 93,000 125,000
Plant and equipment 862,000 751,000
Less accumulated depreciation 210,500 190,300
Net plant and equipment 651,500 560,700
Total assets
$ 1,220,300 $ 1,144,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 175,900 $ 231,100
Accrued liabilities 8,100 15,200
Income taxes payable 42,800 39,500
Total current liabilities 226,800 285,800
Bonds Payable 203,000 102,000
Total liabilities 429,800 387,800
Stockholders’ equity:
Common stock 597,500 605,000
Retained earnings 193,000 151,200
Total stockholders' equity 790,500 756,200
Total liabilities and stockholders' equity $ 1,220,300 $ 1,144,000
Rusco Company
Income Statement
For the Year Ended July 31, 2014
Sales $ 820,000
Cost of goods sold 512,500
Gross margin 307,500
Selling and administrative expenses 219,350
Net operating income 88,150
Nonoperating items:
Gain on sale of investments $20,500
Loss on sale of equipment (6,200) 14,300
Income before taxes 102,450
Income taxes 30,730
Net income $ 71,720
The following additional information is available for the year 2014.
a. The company declared and paid a cash dividend.
b. Equipment was sold during the year for $44,800. The equipment had originally cost $92,000 and had accumulated depreciation of $41,000.
c. Long-term investments that had cost $32,000 were sold during the year for $52,500.
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 for operating activities for 2014. (Negative amount should be indicated by a minus sign.)
3.
Compute free cash flow for 2014. (Negative amount should be indicated by a minus sign.)
Mary Walker, president of Rusco Company, considers $21,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $16,000in cash was available at the end of 2014. 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.
Explanation / Answer
Cash flows from operating activities Net income $71,720 Adjustments for: Depreciation and amortization 20200 Profit on sale of investment -20500 loss on sale of Equipment 6200 dec in accounts receivables 1100 inc in inventories -54300 Dec in prepaid exp 8500 inc in income tax payable 3300 Decrease in acc liab -7100 Decrease in acc payables -55200 -97800 Cash generated from operations ($26,080) Cash flows from investing activities Sale of long term investment 52500 Proceeds from sale of equipment 44800 Net cash used in investing activities 97300 Cash flows from financing activities Proceeds from issue of common stock Proceeds from issuance of long-term debt Dividends paid Net cash used in financing activities Net increase in cash and cash equivalents $71,220 Cash and cash equivalents at beginning of period 34200 Cash and cash equivalents at end of period 16000
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