Wu Company's income statement for the year ended December 31, 2011, and its comparative balance sheets as of December 31, 2011 and 2010, are presented on the next page(attached documents). During 2011, Wu Company engaged in these 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 indirected method, prepare a statement of cash flows for Wu Company. Include a supporting schedule of noncash investing transactions and financing transactions.
2. What are the primary reasons for Wu Company'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. Compare and contrast what these two performance measures tell you about Wu Company's cash-generating ability.