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 .... Prepaid expenses 140,000 5,000 90,000 9,000 Total current assets 273,000 200,000 Long-term investments 50,000 70,000 Plant and equipment.. 430,000 300,000 Less accumulated depreciation 60,000 50,000 Net plant and equipment 370,000 250,000 Total assets $693,000 $520,000 Liabilities and Stockholders' Equity Current liabilities: $ 60,000 17,000 Accounts payable $123,000 Accrued liabilities 8,000 Income taxes payable 20,000 12,000 Total current liabilities 151,000 89,000 Bonds payable 70,000 Total liabilities 221,000 89,000 Stockholders' equity: 366,000 346,000 85,000 Common stock.. Retained earnings 106,000 Total stockholders' equity 472,000 431,000 Total liabilities and stockholders' equity $693,000 $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 $500,000 300,000 200,000 158,000 ... 42,000 Nonoperating items: Gain on sale of investments $10,000 8,000 50,000 Loss on sale of equipment (2,000) Income before taxes Income taxes 20,000 $ 30,000 Net income

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter23: Statement Of Cash Flows

Section: Chapter Questions

Problem 3SEA

See similar textbooks

Related questions

Question

Prepare and Interpret a Statement of Cash Flows; Free Cash Flow

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.

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.

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.

Required:

1. Using the indirect method, compute the net cash provided by operating activities for this year.

2. Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for this year.

3. Compute free cash flow for this year.

4. Explain the major reasons for the decline in the company’s cash balance.

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 ....
Prepaid expenses
140,000
5,000
90,000
9,000
Total current assets
273,000
200,000
Long-term investments
50,000
70,000
Plant and equipment..
430,000
300,000
Less accumulated depreciation
60,000
50,000
Net plant and equipment
370,000
250,000
Total assets
$693,000
$520,000
Liabilities and Stockholders' Equity
Current liabilities:
$ 60,000
17,000
Accounts payable
$123,000
Accrued liabilities
8,000
Income taxes payable
20,000
12,000
Total current liabilities
151,000
89,000
Bonds payable
70,000
Total liabilities
221,000
89,000
Stockholders' equity:
366,000
346,000
85,000
Common stock..
Retained earnings
106,000
Total stockholders' equity
472,000
431,000
Total liabilities and stockholders' equity
$693,000
$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
$500,000
300,000
200,000
158,000
...
42,000
Nonoperating items:
Gain on sale of investments
$10,000
8,000
50,000
Loss on sale of equipment
(2,000)
Income before taxes
Income taxes
20,000
$ 30,000
Net income

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions