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. 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. Rusco Company Comparative Balance Sheet at July 31 This Year Last Year Assets Current assets: Cash $ 8,000 $ 21,000 Accounts receivable 120,000 80,000 Inventory 140,000 90,000 Prepaid expenses 5,000 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: Accounts payable $ 123,000 $ 60,000 Accrued liabilities 8,000 17,000 Income taxes payable 20,000 12,000 Total current liabilities 151,000 89,000 Bonds payable 70,000 0 Total liabilities 221,000 89,000 Stockholders’ equity: Common stock 366,000 346,000 Retained earnings 106,000 85,000 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 $ 500,000 Cost of goods sold 300,000 Gross margin 200,000 Selling and administrative expenses 158,000 Net operating income 42,000 Nonoperating items: Gain on sale of investments $ 10,000 Loss on sale of equipment (2,000) 8,000 Income before taxes 50,000 Income taxes 20,000 Net income $ 30,000 The following additional information is available for this year. The company declared and paid a cash dividend. Equipment was sold during the year for $8,000. The equipment originally cost $20,000 and had accumulated depreciation of $10,000. Long-term investments that cost $20,000 were sold during the year for $30,000. The company did not retire any bonds payable or repurchase any of its common stock Required: 1. Prepare a statement of cash flows
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.
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.
Rusco Company Comparative Balance Sheet at July 31 |
||
This Year | Last Year | |
---|---|---|
Assets | ||
Current assets: | ||
Cash | $ 8,000 | $ 21,000 |
Accounts receivable | 120,000 | 80,000 |
Inventory | 140,000 | 90,000 |
Prepaid expenses | 5,000 | 9,000 |
Total current assets | 273,000 | 200,000 |
Long-term investments | 50,000 | 70,000 |
Plant and equipment | 430,000 | 300,000 |
Less |
60,000 | 50,000 |
Net plant and equipment | 370,000 | 250,000 |
Total assets | $ 693,000 | $ 520,000 |
Liabilities and |
||
Current liabilities: | ||
Accounts payable | $ 123,000 | $ 60,000 |
Accrued liabilities | 8,000 | 17,000 |
Income taxes payable | 20,000 | 12,000 |
Total current liabilities | 151,000 | 89,000 |
Bonds payable | 70,000 | 0 |
Total liabilities | 221,000 | 89,000 |
Stockholders’ equity: | ||
Common stock | 366,000 | 346,000 |
Retained earnings | 106,000 | 85,000 |
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 | $ 500,000 | |
---|---|---|
Cost of goods sold | 300,000 | |
Gross margin | 200,000 | |
Selling and administrative expenses | 158,000 | |
Net operating income | 42,000 | |
Nonoperating items: | ||
Gain on sale of investments | $ 10,000 | |
Loss on sale of equipment | (2,000) | 8,000 |
Income before taxes | 50,000 | |
Income taxes | 20,000 | |
Net income | $ 30,000 |
The following additional information is available for this year.
- The company declared and paid a cash dividend.
-
Equipment was sold during the year for $8,000. The equipment originally cost $20,000 and had accumulated depreciation of $10,000.
-
Long-term investments that cost $20,000 were sold during the year for $30,000.
-
The company did not retire any bonds payable or repurchase any of its common stock
Required:
1. Prepare a statement of cash flows
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