Question

Mary Walker, president of Rusco Company, considers $24,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $19,000 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 $ 19,000 204,800 253,600 9,800 487,200 102,000 868,000 212.000 656.6ea $1,245,200 $ 37,800 215.20 198,4ee 19.800 471,200 140,000 754,000 191.200 5 62. sea $1,174,000 Assets Current assets: Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Total current assets Long-term investments Plant and equipment Less accumulated depreciation Net plant and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Stockholders' equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 3 178,600 8,400 45,200 232,200 212,000 444,200 $ 234,400 15,800 41.000 291,200 188,000 399,200 635,500 165,500 801,000 $1,245, 200 620,000 154,800 774,800 $1,174,000

Answer 1

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Naming covention is not available, can be slightly different: Amount ($) Solution: 1) Note: Ignore the blank unused lines: Particulars Sales Adjustment to a cash basis: Add: Decrease in Accounts Receivable 2) Note: Ignore the blank unused rows. Cash flow Statement - Direct Method 880000 $ 10,400 Amount ($) 890400 550000 890400 Cost of goods sold Adjustment to a cash basis: Add: Decrease in Accounts payable Add: Increase in Inventory $ $ 55,800 55,200 661000 168000 28,720 661000 Particulars Cash flow from Operating Activities: Cash received from customers Less: Cash disbursement for: Cost of Merchandise purchased Selling and admin. Expenses Income taxes Total Cash Disbursements Net Cash provided by Operating Activities (A) Investing Activities: Proceed from Sale of Equipment Proceed from Sale of Long term investments Addition to plant and Equipment (868000) - (754000-98000) Net Cash used for Investing Activities (B) Selling and admin. Expenses 235400 Adjustment to a cash basis: Les: Depreciation (212000) - (191200-44000) $ -64,800 Less: Decrease in Prepaid expenses $ -10,000 Add: Decrease in Accrued liabilities $ 7,400 857720 $ 32,680 47200 60000 -212000 168000 $ 32,920 -104800 Income tax Expense Adjustment to a cash basis: Less: Increase in Income tax Payable -4200 $ $ 28,720 32,680 Net Cash flow from Operating activities 15,500 104000 -66180 Cash Flow from Financing Activities: Issuance of common stock Issuance of Bonds Payable Cash Dividend paid (165500)-(154800+76880) Net Cash used for Financing Activities -C) Net Decrease in Cash (A+B+C) Beginning Cash and cash equivalents Ending Cash and cash equivalents $ 53,320 $-18,800 $ 37,800 $ 19,000