Ortega Corporation's income statement for the year ended June 30, 2011, and its comparative balance sheets as of June 30, 2011 and 2010, appear on the nest page. During 2011, the corporation sod at a loss of $ 4,000 equipment that cost $24,000, on which it had accumulated depreciation of $17,000. It also purchased land and a building for $100,000 through an increase of $100,000 in Mortgage Payable; made a $20,000 payment on the mortgage; repaid $80,000 in notes but borrowed an additional $30,000 through the issuance of a new note payable; and declared and paid a $60,000 cash dividend.

Required
1. Using the indirect method, prepare a statement of cash flows, include a supporting schedule of noncash investing and financing transactions.
2. What are the primary reasons for Ortega Corporation's large increase in cash from 2010 to 2011?
3. Compute and assess cash flow yield and free cash flow for 2011. How would you assess the corporation's cash-generatingability?

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Ortega Corporation Income Statement For the Year Ended June 30, 2011 Sales Cost of goods sold Gross margin Operating expenses (including $4,040,900 3,656,300 384,600 depreciation expense of $60,000) Income from operations Other income (expenses) 189,200 195,400 Loss on sale of equipment ($ 4,000) (37,600) Interest expense Income before income taxes Income taxes expense Net income 41600 153,800 34,200 5 119,600 Ortega Corporation Comparatlve Balance Sheets June 30, 2011 and 2010 2011 2010 Assets Cash Accounts receivable (net) Inventory Prepaid expenses Property, plant, and equipment Accumulated depreciation-property $167,000 100,000 180,000 600 628,000 20,000 120,000 220,000 1,000 552,000 plant, and equipment Total assets (183,000) 892,600 (140,000) 773,000 Llabllitles and Stockholders' Equity Accounts payable Notes payable (due in 90 days) Income taxes payable Mortgage payable Common stock, $5 par value Retained earnings Total liabilities and stockholders' equity 64,000 30,000 26,000 360,000 200,000 212600 892,600 42,000 80,000 18,000 280,000 200,000 153,000 $773,000