Flanders Corporation's income statement for the year ended June 30, 20x8 and its comparative balance sheets as of June 30, 20×8 and 20×7 appear on the opposite page. During 20×8, the corporation sold equipment that cost $48,000, on which it had accumulated depreciation of $34,000, at a loss of $8,000. It also purchased land and a building for $200,000 through an increase of $200,000 in Mortgage Payable; made a $40,000 payment on the mortgage; repaid notes but borrowed an additional $60,000 through the issuance of a new note payable; and declared and paid a $120,000 cash dividend.

Flanders Corporation

Income Statement

For the Year Ended June 30, 20×8

Flanders Corporation
Comparative Balance Sheets
June 30, 20×8 and 20×7

Liabilities and Stockholders' Equity

Required
1. Using the indirect method, prepare a statement of cash flows. Include a supporting schedule of noncash investing and financing transactions.
2. User Insight: What are the primary reasons for Flanders Corporation's large increase in cash from 20×7 to 20×8?
3. User Insight: Compute and assess cash flow yield and free cash flow for 20×8. How would you assess the corporation's cash-generating ability?

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Sales Cost of goods sold Gross margin Operating expenses (including depreciation $8,081,800 7,312,600 $ 769,200 expense of $120,000) Income from operations Other income (expenses) 378,400 $390,800 Loss on sale of equipment ($ 8,000) 75,200 Interest expense Income before income taxes Income taxes expense Net income 83,200 $307,600 68,400 $ 239,200 20x8 20x7 Assets Cash Accounts receivable (net) Inventory Prepaid expenses Property, plant, and equipment Accumulated depreciation, property $ 334,000 40,000 240,000 440,000 2,000 1,104,000 200,000 360,000 1,200 1,256,000 plant, and equipment Total assets (280,000) $1,785,200 $1,546,000 366,000) Accounts payable Notes payable (due in 90 days) Income taxes payable Mortgage payable Common stock, $5 par value Retained earnings Total liabilities and stockholders' equity 128,000 60,000 52,000 720,000 400,000 425,200 $1,785,200 84,000 160,000 36,000 560,000 400,000 306,000 $1,546,000