Chaplin Arts, Inc.s comparative balance sheets for December 31, 2014 and 2013, follow.

Chaplin Arts, Inc.

Comparative Balance Sheets

December 31, 2014 and 2013

	2014	2013
Assets
Cash	$94,560	$27,360
Accounts receivable, net	102,430	75,430
Inventory	112,890	137,890
Prepaid expenses	--	20,000
Land	25,000	--
Building	137,000	--
Accumulated depreciation, building	(15,000)	--
Equipment	33,000	34,000
Accumulated depreciation, equipment	(14,500)	(24,000)
Patents	4,000	6,000
TOTAL ASSETS	$479,380	$276,680
Liabilities and Equity
Accounts payable	$10,750	$36,750
Notes payable (current)	10,000	--
Accrued liabilities	--	12,300
Mortgage payable	162,000	--
Common stock, $10 par value	180,000	150,000
Additional paid-in capital	57,200	37,200
Retained earnings	59,430	40,430
TOTAL Liab. and Equity	$479,380	$276,680

The following additional information about Chaplin Arts operations during 2013 is available: (a) net income, $28,000; (b) building and equipment depreciation expense amounts, $15,000 and $3,000, respectively; (c) equipment that cost $13,500 with accumulated 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; and (i) paid cash dividends, $9,000.

REQUIRED

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

ACCOUNTING CONNECTION> Why did Chaplin Arts have an increase in cash of $67,200 when it recorded net income of only $28,000?Discuss and interpret.[This must be answered separately from the provided template.]

BUSINESS APPLICATION>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?[Answer this separately from the provided template.]