Defective suspension of Toyota 1997. A doubt?

I just purchased a 1997 toyota corolla which has done 139000 miles.

1) Since last few days I am observing that some type of squashing noise is coming from my front suspension when it jumps on a bump or when I brake very hard. So I tried to press the car from the top of the hood when it was standstill and I heard the same sound again. Please let me know what is the problem with my car? And how much it is likely to cost?

2) My car is turning 22 mpg under city driving condition is it fine, or do I need to go ahead with the overhauling of the engine.