Reed Corporation€™s income statement for the year ended June 30, 2014, and its comparative balance sheets as of June 30, 2014 and 2013, follow.

During 2014, the corporation sold at a loss of $8,000 equipment that cost $48,000, on which it had accumulated depreciation of $34,000. It also purchased land and a building for $200,000 through an increase of $200,000 in Mortgage Payable; made a $40,000 payment on the mortgage; repaid $160,000 in notes but borrowed an additional $60,000 through the issuance of a new note payable; and declared and paid a $120,000 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 Reed€™s large increase in cash from 2013 to 2014?
3. Compute and assess cash flow yield and free cash flow for 2014. (Round to one decimal place.) How would you assess the corporation€™s cash-generatingability?

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Reed Corporation Income Statement For the Year Ended June 30, 2014 Sales Cost of goods sold Gross margin Operating expenses (including depreciation $8,081,800 7,312,600 S769,200 expense of $120,000) Income from operations Other income (expenses) Loss on sale of equipment Interest expense Income before income taxe:s Income taxes expense Net income 378,400 390,800 $ (8,000) (75,200) (83,200) 307,600 68,400 S 239,200 Reed Corporation Comparative Balance Sheets June 30, 2014 and 2013 2014 2013 Assets Cash Accounts receivable (net) Inventory Prepaid expenses Property, plant, and equipment Accumulated depreciation-property, plant, and equipment Total assets S 334,000 200,000 360,000 1,200 1,256,000 (366,000) 1,785,200 S40,000 240,000 440,000 2,000 1,104,000 (280,000) $1,546,000 Liabilities 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 S 128,000 60,000 52,000 720,000 400,000 425,200 1,785,200 84,000 160,000 36,000 560,000 400,000 306,000 $1,546,000