KLM, Inc.'s Comparative Balance Sheets for December 31, 2022 and 2021, are presented below.

Additional information about KLM'a operations during 2016 is as follows: (1) Net Income $56,000;

(2) building and equipment depreciation expense amount, $30,000; and $6,000 respectively;

(3) equipment that cost $27,000 with accumulated depreciation of $25,000 sold at a gain of $10,600;

(4) purchased an equipment for $25,000; (5) patent amortization, $6,000; (6) purchase of patent,

$2,000; (7) funds borrowed by signing notes payable, $50,000; (8) paid-down notes payable, $30,000;

(9) land and building purchased for $324,000 by signing a mortgage for the total cost; (10) 3,000 shares

of $20 par value common stock issued for total of $100,000; and (11) paid cash dividend, $18,000.

Net Sales for the year, $ 1,120,000 .

2022 2021

Cash $ 189,120 $ 54,720

Accounts Receivable (Net) 204,860 150,860

Inventory 225,780 275,780

Prepaid Expenses 0 40,000

Equipment 66,000 68,000

Accumulated Depreciation- Equipment -29,000 -48,000

Land 50,000 0

Building 274,000 0

Accumulated Depreciation- Building -30,000 0

Patents 8,000 12,000

Total Assets $ 958,760 $ 553,360

Accounts Payable 21,500 73,500

Accrued Liabilities 0 24,600

Notes Payable 20,000 0

Mortgage Payable 324,000 0

Common Stock, $10 par value 360,000 300,000

Additional Paid-In Capital 114,400 74,400

Retained Earnings 118,860 80,860

Total Liabilities and Stockholders' Equity $ 958,760 $ 553,360

Required:

a- Using indirect method, prepare a Statement of Cash Flows for KLM, Inc.

b- Why did KLM have an increase in cash of $134,400 when it recorded Net Income of only $56,000.

Discuss and interpret.

c- Compute and assess Cash Flow Yield; Cash Flows to Sales, Cash Flows to Assets and Free

Cash Flow for 2016. What is your assessment KLM's cash generating ability