Mary Walker president of Rusco Company considers 43000 to be

Mary Walker, president of Rusco Company, considers $43,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $38,000 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 Rusco Company Comparative Balance Sheet July 31, 2015 and 2014 2015 2014 Assets Current assets Accounts receivable Inventory Prepaid expenses 227,800 270,700 23,100 5 38,000 60,800 239,900 209,800 42,800 Total current assets 559,400 552,900 Long-term investments 159,000 235,000 773,000 96,900 Plant and equipment 908,000 221,500 Net plant and equipment 884,500 578,100 Total assets 51,402,900 $1,384,000 Liabilities and Stockholders Equity Current liabilities Accounts payable Accrued liabilities Income taxes payable 5 195,700 255,300 19,800 50,500 10,300 80,400 Total current liabilities Bonds payable 288,400 289,000 325,400 Total liabilities 535,400 325,400 715,000 323,800 Common stock 738,000 131,500 Total stockholders\' equity 887,500 1,038,800

Solution

1)

Cash Flow from Operating Activities:

Amount

Amount

Sales

$          1,260,000.00

Adjustment to a Cash Basis

Decrease In Accounts Receivables

$                12,300.00

$                                                                  1,272,300.00

Cost Of Goods Sold

$              787,500.00

Adjustment to a Cash Basis

Increase In Inventory

$                60,900.00

Decrease In Accounts Payable

$                59,600.00

$                                                                   -908,000.00

Selling And Administrative Expenses

$              337,050.00

Adjustment to a Cash Basis

Decrease In Prepaid Expenses

$              -19,500.00

Decrease in Accrued Liabilities

$                  9,300.00

$                                                                  -239,250.00

Depreciation Expenses

$              -87,600.00

Income taxes

$                36,890.00

Adjustment to a Cash Basis

$                                                                     -36,890.00

$                                                                        88,160.00

2)

Cash Flow Statement

For the year ended 31-07-2015

Cash Flow from Operating Activities:

Amount in

Amount

Cash Receipts From Customers

$          1,272,300.00

Less-Cash Disbursment for

Suppliers

$          -908,000.00

Selling and Administrative Expenses

$           -239,250.00

Income taxes Expenses

$              -36,890.00

A. Cash Flow from Operating Activities

$                                                                        88,160.00

Cash Flow from Investing Activities:

sale of Long Tern Investment

$              107,500.00

Purchase of Equipment

$           -269,000.00

sale of Equipment

$                62,400.00

B. Cash Used in Investing Activities

$                                                                   -99,100.00

Cash Flow from Financing Activities:

Issue of Common Stock

$                21,000.00

Issue of Bonds

$              269,000.00

Dividend paid

$           -301,660.00

C. Cash Flow from Financing Activities

$                                                                     -11,660.00

Increase (Decrease) in cash [A+B+C]

$                                                                     -22,600.00

Add: cash at the beginning [2014 balance]

$                                                                        60,600.00

Cash at the end [2015 Balance]

$                                                                        38,000.00

Equipment Account

Particulars

Amount

Particulars

Amount

To Balance B/d

$              773,000.00

By Accumulated Depreciation (on sold Asset)

$        63,000.00

To Bank (Balancinf Figure Equipment Purchased)

$              269,000.00

By Cash

$        62,400.00

By Loss on sale of Asset

$        10,600.00

By balance C/d

$      906,000.00

$          1,042,000.00

$ 1,042,000.00

Accumulated Depreciation Account

Particulars

Amount

Particulars

Amount

To Equipment Account (dep on sold asset)

$                63,000.00

By balance B/d

$      196,900.00

To Balance C/d

$              221,500.00

By Depreciation(Current year Depreciation being Balancing Figure)

$        87,600.00

$              284,500.00

$      284,500.00

Calculation of tax Paid

Opening Balance of Provision

$                                                                        50,500.00

Add-Current year Tax

$                                                                        46,790.00

Less- Closing balance of Tax provision

$                                                                     (60,400.00)

Tax paid

$                                                                        36,890.00

1)	Cash Flow from Operating Activities:	Amount	Amount
	Sales	$          1,260,000.00
	Adjustment to a Cash Basis
	Decrease In Accounts Receivables	$                12,300.00	$                                                                  1,272,300.00
	Cost Of Goods Sold	$              787,500.00
	Adjustment to a Cash Basis
	Increase In Inventory	$                60,900.00
	Decrease In Accounts Payable	$                59,600.00	$                                                                   -908,000.00
	Selling And Administrative Expenses	$              337,050.00
	Adjustment to a Cash Basis
	Decrease In Prepaid Expenses	$              -19,500.00
	Decrease in Accrued Liabilities	$                  9,300.00	$                                                                  -239,250.00
	Depreciation Expenses	$              -87,600.00
	Income taxes	$                36,890.00
	Adjustment to a Cash Basis		$                                                                     -36,890.00
			$                                                                        88,160.00