St. Charles Antique Market reported a net loss of $6,000 for the year ended December 31, 2012. The following items were included on St. Charles Antique Market's balance sheets at December 31, 2012 and 2011:

12/31/12 12/31/11

Cash...............................$ 36,300..............$ 3,100

Accounts receivable...............79,000.............126,000

Notes receivable..................112,600.............104,800

St. Charles Antique Market uses the indirect method to prepare its statement of cash flows. It does not have any other current assets or current liabilities and did not enter into any investing or financing activities during 2012.

Required

1. Prepare St. Charles Antique Market's 2012 statement of cash flows.

2. Draft a brief memo to the owner to explain why cash increased during such an unprofitable year.