The comparative balance sheets for Alvin Arts, Inc., for December 31, 2011 and 2009 appear on the opposite page. Additional information about Alvin Art's operations during 2010 is as follows:

(a) Net income, $28,000

(b) Building and equipment depreciation expense amounts, $ 15,000 and $ 3,000, respectively;

(c) Equipment that cost $ 13,500 with accumulated depreciation of $ 12,500 sold at a gain of $5,300

(d) Equipment purchase, $ 12,500

(e) Patent amortization, $ 3,000; purchase of patent, $1,000;

(f) Funds borrowed by issuing notes payable, $ 25,000; notes payable repaid, $ 15,000

(g) Land and building purchased for $ 162,000 by signing a mortgage for the total cost;

(h) 1,500 shares of $20 par value common stock issued for a total of $ 50,000; and

(i) Paid cash dividends, $ 9,000.

Required
1. Using the indirect method, prepare a statement of cash flows for Alvin Arts, Inc,.
2. Why did Alvin Arts have an increase in cash of $67,200 when it recorded net income of only $28,000? Discuss and interpret.
3. Compute and assess cash flow yield and free cash flow for 2010. What is your assessment of Alvin's cash-generatingability?

Alvin Arts, Inc. Comparatlve Balance Sheets December 31, 2010 and 2009 2010 2009 Assets Cash Accounts receivable (net Inventory Prepaid expenses Land Building Accumulated depreciation-building Equipment Accumulated depreciation-equipment Patents Total assets $94,560 102,430 112,890 $ 27,360 75,430 137,890 20,000 25,000 137,000 (15,000) 33,000 (14,500) 4,000 $479,380 34,000 (24,000) 6,000 $276,680 Llabllltles and Stockholders Equity s 10,750 10,000 Accounts payable Notes payable (current) Accrued liabilities Mortgage payable Common stock, $10 par value Additional paid-in capital Retained earnings Total liabilities and stockholders' equity $ 36,750 12,300 162,000 180,000 57,200 59,430 $479,380 150,000 37,200 40,430 $276,680