Joyner Company's income statement for Year 2 follows:

Sales $900,000

Cost of goods sold 500,000

Gross margin 400,000

Selling and administrative expenses 328,000

Net operating income 72,000

Nonoperating items:

Gain on sale of equipment 8,000

Income before taxes 80,000

Income taxes 24,000

Net income $56,000

Its balance sheet amounts at the end of Years 1 and 2 are as follows:

Year 2 Year 1

Assets

Cash and cash equivalents $4,000 $21,000

Accounts receivable 250,000 170,000

Inventory 310,000 260,000

Prepaid expenses 7,000 14,000

Total current assets 571,000 465,000

Property, plant, and equipment 510,000 400,000

Less accumulated depreciation 132,000 120,000

Net property, plant, and equipment 378,000 280,000

Loan to Hymans Company 40,000 0

Total assets $989,000 $745,000

Liabilities and Stockholders' Equity

Accounts payable $ 310,000 $250,000

Accrued liabilities 20,000 30,000

Income taxes payable 45,000 42,000

Total current liabilities 375,000 322,000

Bonds payable 190,000 70,000

Total liabilities 565,000 392,000

Common stock 300,000 270,000

Retained earnings 124,000 83,000

Total stockholders' equity 424,000 353,000

Total liabilities and stockholders' equity $989,000 $745,000

Equipment that had cost $40,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for $18,000. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock.

Required: SHOW YOUR WORK

Using the indirect method, Prepare a statement of cash flows for Year 2

Briefly explain why cash declined so sharply during the year