Problem 12-13A Prepare and Interpret a Statement of Cash Flows; Free Cash Flow [
ID: 2576827 • Letter: P
Question
Problem 12-13A Prepare and Interpret a Statement of Cash Flows; Free Cash Flow [LO12-1, LO12-2, LO12-3]
Mary Walker, president of Rusco Company, considers $38,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $33,000 in cash was available at the end of 2015. 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.
Using the indirect method, compute the net cash provided by operating activities for 2015. (Negative amount should be indicated by a minus sign.)
Using the data from (1) above, and other data from the problem as needed, prepare a statement of cash flows for 2015. (List any deduction in cash and cash outflows as negative amounts.)
Compute free cash flow for 2015. (Negative amount should be indicated by a minus sign.)
Mary Walker, president of Rusco Company, considers $38,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $33,000 in cash was available at the end of 2015. 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
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Rusco Company Cash Flow Statement For year ended 31 July 2015 Cash flows from operating activities Net Income $ 100,960 Adjustment to reconcile net income to: Depreciation expense $ 81,600 $219,000-$195,400+$58,000 Gain on sale of investments $ (29,000) Loss on sale of equipment $ 9,600 Decrease in accounts receivable $ 11,800 Increase in inventory $ (59,400) Decrease in prepaid expenses $ 17,000 Decrease in accounts payable $ (58,600) Decrease in accrued liabilities $ (8,800) Increase in income tax payable $ 8,400 $ (27,400) Net cash provided by operating activities $ 73,560