HiDef Films , Inc., is developing its annual financial statements at December 31, 2012. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows:

Additional Data:
a. Bought equipment for cash, $59,250.
b. Paid $11,500 on the long-term note payable.
c. Issued new shares of stock for $32,600 cash.
d. Dividends of $12,650 were declared and paid.
e. Other expenses all relate to wages.
f. Accounts payable includes only inventory purchases made on credit.
Required:
1. Prepare the statement of cash flows using the indirect method for the year ended December 31, 2012.
2. Based on the cash flow statement, write a short paragraph explaining the major sources and uses of cash by HiDef Films during2012.

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2012 2011 Balance sheet at December 31 $ 68,250 $ 63,500 Cash Accounts receivable 15,250 22,250 Merchandise inventory Property and equipment Less: Accumulated depreciation 22,250 18,000 209,250 150,000 (45,750) (59,000) $256,000 $208,000 $ 9,000 $ 19,000 1,200 71,000 65,900 Accounts payable Wages payable Note payable, long-term Contributed capital Retained earnings 4,000 59,500 98,500 85,000 50,900 $256,000 $208,000 Income statement for 2012 $195,000 Sales Cost of goods sold Depreciation expense Other expenses 92,000 13,250 43,000 $ 46,750 Net income