Foxboro Company€™s income statement for Year 2 follows:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $700,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . 4 00,000
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . 300,000
Selling and administrative expenses . . . . . . . 216,000
Net operating income . . . . . . . . . . . . . . . . . . 84,000
Gain on sale of equipment . . . . . . . . . . . . . . 6,000
Income before taxes . . . . . . . . . . . . . . . . . . . 90,000
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 27,000
N et income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,000
Balance sheet accounts for Foxboro Company contained the following amounts at the end of Years 1 and 2:

Equipment that had cost $30,000 and on which there was accumulated depreciation of $10,000 was sold during Year 2 for $26,000. Cash dividends totaling $33,000 were declared and paid during Year 2.
Required:
1. Using the indirect method, compute the net cash provided by operating activities for Year 2.
2. Prepare a statement of cash flows for Year 2.
3. Briefly explain why cash declined so sharply during theyear.

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Year 2 Year 1 Debit Beiance Accounts Cash Accounts Receivable nventory Prepaid Expenses Loan to Harker Company Plant and Equipment Total debits S 11,000 S 19,000 250,000180,000 318,000 270,000 7,000 16,000 40,000 620,000 500,000 $1246,000 985,000 Credit Balance Accounts Accumulated Depreciation Accounts Payable Accrued Liabilities Bonds Payable Deferred income Taxes Common Stock Retained Eamings Total credits S 165,000 130,000 310000 260,000 42000 50,000 190,000 100,000 84,000 80,000 335,000275,000 120,000 $1.246,000 $985,000