120 stiches
Blue cuff -- ribbing 1X1
Yellow part - plain knitting. Perl side out ( to hide decreases).
Black stripe - perl every row

Decreasing:
divide by 8
K 13, 2t
k
K12, 2t
k
K11, 2t
K
…
K1, 2t
k
2t
k
Tie off the last 6 stitches.

Hair:
crochet black mini-hat for inside. Randomly add about 10 anemone tentacles (http://www.ravelry.com/patterns/library/anemone-hats)
Put the black hat inside the yellow one.
Pull tentacles through where appropriate. Sew the rest of the hat in.

Eye:
brown: crochet 8
white: crochet 2 in each st
crochet 2 in 1, crochet
grey: half double crochet in all st
Sew a black button in the middle of the eye.