The comparative balances sheets for Lopez Tools, Inc., for December 31, 2010 and 2009, are at the

Question:

The comparative balances sheets for Lopez Tools, Inc., for December 31, 2010 and 2009, are at the top of the next page. During 2010, the company had net income of $48,000 and building and equipment depreciation expenses of $40,000 and $30,000, respectively. It amortized intangible assets in the amount of $ 10,000; purchased investments for $58,000; sold investments for $75,000, on which it recorded a gain of $17,000; issued at $120,000 of long term bonds at face value; purchased land and a warehouse through a $160,000 mortgage; paid $20,000 to reduce the mortgage; borrowed $30,000 by issuing notes payables; repaid notes payable in the amount of $90,000; declared and paid cash dividend is the amount of $18,000; and purchased treasury stock in the amount of $10,000.

.:.

Required

1. Using the indirect method, prepare a statement of cash flows for Lopez Tools, Inc.

2. Why did Lopez tools Experience a decrease in cash in a year in which it has a net income of $ 48,000? Discuss and interpret.

3. Compute and assess cash flow yield and free cash flow for 2010. Why is each of these measures important in assessing cash-generating ability?

Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...