Stegner Inc. reported net income of $130,000 for the year ended December 31, 2017. The following items were included on Stegner's balance sheets at December 31, 2017 and 2016:

__________________________ 12/31/17 ___________ 12/31/16

Cash ............................... $105,000 ................ $110,000

Accounts receivable .............. 223,000 .................... 83,000

Notes receivable ................... 95,000 .................. 100,000

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 2017.

Required

1. Prepare Stegner's 2017 statement of cash flows.

2. Draft a brief memo to the owner to explain why cash decreased during a profitable year.