EBook Company's Most Recent Balance Sheet,income Statement,and Other Important Information

Essay

eBook Company's most recent balance sheet,income statement,and other important information for 2017 are presented below.

$\begin{array}{c}\text {eBook Company}\\\text {Income Statement}\\\text {For the Year Ended December 31, 2017}\\\begin{array}{lr}\text { Sales } & \$ 1,960,000 \\\text { Cost of goods sold } & \underline{1,204,000 }\\ \text { Gross margin } & 756,000 \\\text { Operating expenses } & 270,000 \\\text { Depreciation expense } & \underline{260,000} \\\text { Operating income } & 226,000 \\\text { Interest expense } &(26,000)\\\text { Gain on sale of equipment }& 40,000 \\\text { Loss on sale of long-term investments }& \underline{(6,000)} \\\text { Income before taxes } & 234,000\\\text { Income tax expense }& \underline{160,000} \\\text { Net income }& \underline{74,000}\end{array}\end{array}$

Additional data for 2017
Sold equipment with a book value of $38,000 (= $198,000 cost * $160,000 accumulated depreciation)for $78,000 cash.
Purchased equipment for $278,000 cash.
Sold long-term investments for $74,000 cash.These investments had an original cost of $80,000.
Purchased long-term investments for $10,000 cash.
Issued bonds for $186,000 cash.
Issued common stock for $22,000 cash.
Declared and paid $52,000 in cash dividends.
Prepare a statement of cash flows for the year ended December 31,2017,using the indirect method.
The owner of eBook Company wants to know why cash decreased from $720,000 to $590,000 given the company's net income of $74,000.Use the information in the statement of cash flows to briefly explain why cash decreased.