Shah Fabrics, Inc.s comparative balance sheets for December 31, 2014 and 2013, follow. Shah Fabrics, Inc. Comparative Balance Sheets December 31, 2014 and 2013 2014 2013 Assets Cash $ 378,240 $ 109,440 Accounts receivable (net) 409,720 301,720 Inventory 451,560 551,560 Prepaid expenses80,000 Land 100,000 Building 548,000 Accumulated depreciationbuilding (60,000) Equipment 132,000 136,000 Accumulated depreciationequipment (58,000) (96,000) Patents 16,000 24,000 Total assets $1,917,520 $1,106,720 Liabilities and Stockholders equity Accounts payable $ 43,000 $ 147,000 Notes payable (current) 40,000 Accrued liabilities49,200 Mortgage payable 648,000 Common stock, $10 par value 720,000 600,000 Additional paid-in capital 228,800 148,800 Retained earnings 237,720 161,720 Total liabilities and stockholders equity $1,917,520 $1,106,720 Additional information about Shah Fabrics operations during 2014 is as follows: (a) net income, $112,000; (b) building and equipment depreciation expense amounts, $60,000 and $12,000, respectively; (c) equipment that cost $54,000 with accumulated depreciation of $50,000 sold at a gain of $21,200; (d) equipment purchases, $50,000; (e) patent amortization, $12,000; purchase of patent, $4,000; (f) funds borrowed by issuing notes payable, $100,000; notes payable repaid, $60,000; (g) land and building purchased for $648,000 by signing a mortgage for the total cost; (h) 6,000 shares of $40 par value common stock issued for a total of $200,000; and (i) paid cash dividend, $36,000. reQUIreD

1. Using the indirect method, prepare a statement of cash flows for Shah Fabrics.

2. aCCountInG ConneCtIonWhy did Shah Fabrics have an increase in cash of $268,800 when it recorded net income of only $112,000? Discuss and interpret.

3. BuSIneSS applICatIon Compute and assess cash flow yield and free cash flow for 2014. (Round to one Needles, Belverd E.; Powers, Marian; Crosson, Susan V. (2013-01-23).