Brick Corporation’s comparative balance sheets as of December 31, 2011 and 2010 and its income statement for the year ended December 31, 2011, follow.

During 2011, Brick Corporation engaged in the following transactions:

a. Sold at a gain of $7,000 furniture and fixtures that cost $35,600, on which it had accumulated depreciation of $28,800.

b. Purchased furniture and fixtures in the amount of $39,600.

c. Paid a $20,000 note payable and borrowed $40,000 on a new note.

d. Converted bonds payable in the amount of $100,000 into 4,000 shares of common stock.

e. Declared and paid $6,000 in cash dividends.

REQUIRED

1. Using the indirect method, prepare a statement of cash flows for Brick Corporation. Include a supporting schedule of noncash investing transactions and financing transactions.

2. What are the primary reasons for Brick Corporation’s large increase in cash from 2010 to 2011, despite its low net income?

3. Compute and assess cash flow yield and free cash flow for 2011. (Round cash flow yield to one decimal place.) Compare and contrast what these two performance measures tell you about Brick’s ability to generate sufficient cash flow.

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Brick Corporation Comparative Balance Sheets December 31,2011 and 2010 2011 2010 Assets Cash Accounts receivable (net) Merchandise inventory Prepaid rent Furniture and fixtures Accumulated depreclation-furniture and fixtures Total assets $164,800 165,200 350,000 2,000 148,000 (42,000 $788,000 $50,000 200,000 450,000 3,000 144,000 (24,000) $823,000 Liabilities and Stockholders'Equity Accounts payable Income taxes payable Notes payable (long-term) Bonds payable Common stock, $20 par value Additional pald-in capital Retained eamings Total liabilitles and stockholders equity $143,400 1400 40,000 100,000 240,000 181440 81,760 $788,000 $200,400 4,400 20,000 200,000 121,440 76,760 $823,000 Brick Corporation Income Statement For the Year Ended December 31, 2011 Sales Cost of goods sold Gross margin Operating expenses (including depreclation $1,609,000 1,127,800 $ 481,200 expense of $46,800) Income from operations Other income (expenses) 449,400 $31,800 7,000 (23,200) Gain on sale of furniture and fixtures Interest expense Income before income taxes Income taxes expense Net income 200 $15,600 4,600 $11,000