Mary Walker, president of Rusco Company, considers $41,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $36,000in 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.

Rusco Company Comparative Balance Sheet July 31, 2014 and 2013
	2014		2013
Assets
Current assets:
Cash	$	36,000	$	58,200
Accounts Receivable		225,200		237,300
Inventory		268,900		208,600
Prepaid expenses		21,700		40,200
Total current assets		551,800		544,300
Long-term investments		153,000		225,000
Plant and equipment		902,000		771,000
Less accumulated depreciation		220,500		196,300
Net plant and equipment		681,500		574,700
Total assets	$	1,386,300	$	1,344,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	193,900	$	253,100
Accrued liabilities		10,100		19,200
Income taxes payable		58,800		49,500
Total current liabilities		262,800		321,800
Bonds Payable		263,000		142,000
Total liabilities		525,800		463,800
Stockholders equity:
Common stock		647,500		705,000
Retained earnings		213,000		175,200
Total stockholders' equity		860,500		880,200
Total liabilities and stockholders' equity	$	1,386,300	$	1,344,000

Rusco Company Income Statement For the Year Ended July 31, 2014
Sales		$	1,220,000
Cost of goods sold			762,500
Gross margin			457,500
Selling and administrative expenses			326,350
Net operating income			131,150
Nonoperating items:
Gain on sale of investments	$30,500
Loss on sale of equipment	(10,200)		20,300
Income before taxes			151,450
Income taxes			45,330
Net income		$	106,120

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 $60,800. The equipment had originally cost $132,000 and had accumulated depreciation of $61,000.
c.	Long-term investments that had cost $72,000 were sold during the year for $102,500.
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.)

2.	Prepare a statement of cash flows for 2014. (List any deduction in cash and cash outflows as negative amounts.)

3.	Compute free cash flow for 2014. (Negative amount should be indicated by a minus sign.)

References

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