Prepare a statement of cash flows for the year ended Dec 31 2012 using the indirect method. Calculate Free cash flow and interpret the cash flow ratio. Why did cash decrease from $358,000 to $300,000 given the company's net income of $70,000, why did cash decrease?

Additional Data for 2012

1) Sold equipment with a book value of $19,000 (=$99,000 cost - $80,000 accumulated depreciation) for $39,000.

2) Purchased equipment for $139,000 cash.

3) Sold long term investments for $37,000 cash. Original cost of $40,000.

4) Purchased long term investments for $5,000 cash

5) Issued (sold) bonds for $88,000 cash

6) Issued sold common stock for $10,000 cash

7) Declared and paid $43,000 in cash dividends.

Balance sheet

current assets	2012	2011
cash	$300,000	$358,000
Accounts receivable	355,000	270,000
merchandise inventory	300,000	180,000
prepaid expenses	25,000	36,000
non current assets:
property plant equipment	500,000	460,000
accumulated depreciation	(310,000)	(260,000)
long term investments	140,000	175,000
total assets	$1,310,000	$1,219,000
Liabilities and owners equity current liabilities
Accounts payable	$60,000	$88,000
Accrued Liabilities	13,000	30,000
Interest payable	23,000	17,000
Income Tax payable	16,000	11,000
Non current liabilities
Bonds Payable	103,000	15,000
Owners equity:
Common stock	680,000	670,000
Retained earnings	415,000	388,000
Total liabilities and owners equity	1,310,000	1,219,000

Sales	$950,000
cost of goods sold	602,000
gross margin	348,000
operating expense	135,000
depreciation expense	130,000
operating income	80,000
Interest expense	(13,000)
Gain on sale of equipment	20,000
Loss on sale of long term investments	(3,000)
Income before taxes	87,000
net income	17,000
net income	$70,000