Ben Tools, Inc.€™s comparative balance sheets for December 31, 2014 and 2013, follow.

During 2014, the company had net income of $96,000 and building and equipment depreciation expenses of $80,000 and $60,000, respectively. It amortized intangible assets in the amount of $20,000; purchased investments for $116,000; sold investments for $150,000, on which it recorded a gain of $34,000; issued $240,000 of long-term bonds at face value; purchased land and a warehouse through a $320,000 mortgage; paid $40,000 to reduce the mortgage; borrowed $60,000 by issuing notes payable; repaid notes payable in the amount of $180,000; declared and paid cash dividends in the amount of $36,000; and purchased treasury stock in the amount of $20,000.

Required
1. Using the indirect method, prepare a statement of cash flows for Ben Tools.
2. Why did Ben Tools experience a decrease in cash in a year in which it had a net income of $96,000? Discuss and interpret.
3. Compute and assess cash flow yield and free cash flow for 2014. Why is each of these measures important in assessing cash-generatingability?
 

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Ben Tools, Inc. Comparative Balance Sheets December 31, 2014 and 2013 2014 2013 Assets s Cash $ 257,600 $ 305,600 Accounts receivable (net) 738,800 758,800 Inventory Prepaid expenses Long-term investments 960,000 800,000 14,800 26,800 440,000 440,000 Land 361,200 321,200 Building 1,200,000 920,000 Accumulated depreciation-building (240,000) 480,000 (116,000) (160,000) 480,000 Equipment Accumulated depreciation-equipment Intangible assets Total assets (56,000) 20,000 40,000 $4,116,400 $3,876,400 Liabilities and Stockholders' Equity Accounts payable Notes payable (current) $ 470,800 $ 660,800 40,000 160,000 Accrued liabilities 10,800 20,800 Mortgage payable Bonds payable 1,080,000 800,000 1,000,000 760,000 Common stock 1,300,000 1,300,000 Additional paid-in capital 80,000 Retained earnings Treasury stock Total liabilities and stockholders' equity 254,800 (120,000) $4,116,400 80,000 194,800 (100,000) $3,876,400 Ben Tools, Inc. Comparative Balance Sheets December 31, 2014 and 2013 2014 2013 Assets s Cash $ 257,600 $ 305,600 Accounts receivable (net) 738,800 758,800 Inventory Prepaid expenses Long-term investments 960,000 800,000 14,800 26,800 440,000 440,000 Land 361,200 321,200 Building 1,200,000 920,000 Accumulated depreciation-building (240,000) 480,000 (116,000) (160,000) 480,000 Equipment Accumulated depreciation-equipment Intangible assets Total assets (56,000) 20,000 40,000 $4,116,400 $3,876,400 Liabilities and Stockholders' Equity Accounts payable Notes payable (current) $ 470,800 $ 660,800 40,000 160,000 Accrued liabilities 10,800 20,800 Mortgage payable Bonds payable 1,080,000 800,000 1,000,000 760,000 Common stock 1,300,000 1,300,000 Additional paid-in capital 80,000 Retained earnings Treasury stock Total liabilities and stockholders' equity 254,800 (120,000) $4,116,400 80,000 194,800 (100,000) $3,876,400

Answer rating: 100% (QA)

Required solution Answer Ans 1 Ben Tools Inc Statement of Cash Flows For the Year Ended December 31 2014 Cash flows from operating activities Net inco... View the full answer