The Comparative balance sheets for Karidis Ceramics, Inc., for December 31, 2012 and 2011, are presented on the next page. During 2012, 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 Karidis Ceramics, Inc.
2. Why did Karidis Ceramics 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 2012. Why is each of these measures important in assessing cash-generating abilities?

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Karldis Ceramics, Inc. Comparative Balance Sheets December 31, 2012 and 2011 2012 2011 Assets Cash Accounts receivable [net) Inventory Prepaid expenses Long-term investments Land Building Accumulated depreciation-building Equipment Accumulated depreciation-equipment Intangible assets Total assets $ 257,600 305,600 738,800 758,800 960,000 800,000 26,800 440,000 440,000 361,200 321200 1,200,000 920,000 (240,000)(160,000 480,000 480,000 (116,000) 56,000 40,000 $4,116,400 $3,876,400 14,800 20,000 Liablltles and Stockholders' Equity Accounts payable S 470,800 $ 660,800 40,000 160,000 20,800 1,080,000 800,000 1,000,000 760,000 1,300,000 1,300,000 80,000 194,800 (120,000) (100,000) $4,116,400 $3,876,400 Notes payable (current) Accrued liabilities 10,800 Mortgage payable Bonds payable Common stock Additional paid-in capital Retained eamings Treasury stock Total liabilities and stockholders equity 80,000 254,800