Stegner Inc. reported net income of $130,000 for the year ended December 31, 2016. The following items were included on Stegner's balance sheets at December 31, 2016 and 2015:

Stegner uses the indirect method to prepare its statement of cash flows. Stegner does not have any other current assets or current liabilities and did not enter into any investing or financing activities during 2016.
Required
1. Prepare Stegner's 2016 statement of cash flows.
2. Draft a brief memo to the owner to explain why cash decreased during a profitable year.

Transcribed Image Text:

Cash Accounts receivable Notes receivable 12/31/16 $105,000 223,000 95,000 12/31/15 $110,000 83,000 100,000