Mary Walker, president of Rusco Company, considers $44,000 to be the minimum cas
ID: 2498097 • Letter: M
Question
Mary Walker, president of Rusco Company, considers $44,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $39,000in 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.
1.)Using the indirect method, compute the net cash for operating activities for 2014
2.)Prepare a statement of cash flows for 2014
Mary Walker, president of Rusco Company, considers $44,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $39,000in 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
Statement of Cash Flow Particulars Amount Total Amount Opening cash and cash equivalents 61,800.00 Income 111,280.00 Gain on sale of invt (32,000.00) Depreciation(24800 + 64000) 88,800.00 Loss on Sale of equipment 10,800.00 Income Taxes 47,520.00 Decrease in AR 12,400.00 Increase in inventory (61,200.00) Decrease in prepaid expenses 20,000.00 Decrease in AP (59,800.00) Decrease in Accrued Liab (9,400.00) Income taxes paid = 51000+47520-61200 (37,320.00) Cash flow from operating activities 91,080.00 Cash flow from Investing activities Purchase of PPE (272,000.00) Sale of Equipment 63,200.00 Sale of investment 110,000.00 Cash flow from Investing activities (98,800.00) Cash flow from Financing activities Issue of Bonds 124,000.00 Redemption of stock (65,000.00) Dividends Paid (111,280-37200) (74,080.00) Cash flow from Financing activities (15,080.00) Closing cash and cash equivalents 39,000.00