A) net income 28,000

b) building and equipment depreciation expense accounts, 15,000 and 3,000 respectively

c) equipment that cost 13,500 with accumlated depreciation of 12,500 sold at a gain of 5,300

d) equipment purchases 12,500

e) patent amortization 3,000; purchase of patent 1,000

f) funds borrowed by issuing notes payable, 25,000; notes payable repaid, 15,000

g) land and building purchased for 162,000 by signing a mortgage for the total cost

h) 1,500 shares of $20 par value common stock issued for a total of 50,000

i) paid cash dividends 9,000

1. Using the indirect method, prepare a statement of cash flows for Chaplin Arts.

2. Why did Chaplin Arts have an increase in cash of when it recorded net income of only ? Discuss and interpret.

3. Compute and assess cash flow yield and free cash flow for 2014. (Round to one decimal place.) What is your assessment of Chaplin Arts cash-generating ability?

Chaplin Arts, Inc Comparative Balance Sheet:s December 31, 2014 and 2013 2014 2013 Assets $ 27,360 75,430 137,890 20,000 Cash Accounts receivable (net) Inventory Prepaid expenses Land Building Accumulated depreciation-building Equipment Accumulated depreciation-equipment Patents Total assets 94,560 102,430 112,890 25,000 137,000 (15,000) 33,000 (14,500) 4,000 $479,380 34,000 (24,000) 6,000 $276,680 Liabilities and Stockholders' Equity 10,750 10,000 Accounts payable Notes payable (current) Accrued liabilities Mortgage payable Common stock, $10 par value Additional paid-in capital Retained earnings Total liabiities and stockholders' equity $ 36,750 12,300 162,000 180,000 57,200 59,430 $479,380 150,000 37,200 40,430 $276,680