Preparing a Statement of Cash Flows (Indirect Method) (AP12-2) BGP Electrical Supply is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized: P12-2 -4, 12-6

	Current Year	Prior Year
Balance sheet at December 31
Cash	$37,000	$29,000
Accounts receivable	32,000	28,000
Merchandise inventory	41,000	38,000
Property and equipment	132,000	111,000
Less: Accumulated depreciation	(41,000)	(36,000)
	$201,000	$170,000
Accounts payable	$36,000	$27,000
Accrued wages expense	1,200	1,400
Note payable, long-term	38,000	44,000
Common stock and additional paid-in capital	88,600	72,600
Retained earnings	37,200	25,000
	$201,000	$170,000
Income statement for current year
Sales	$120,000
Cost of goods sold	70,000
Other expenses	37,800
Net income	$12,200

Additional Data:

a. Bought equipment for cash, $21,000.

b. Paid $6,000 on the long-term note payable.

c. Issued new shares of stock for $16,000 cash.

d. No dividends were declared or paid.

e. Other expenses included depreciation, $5,000; wages, $20,000; taxes, $6,000; other, $6,800.

f. Accounts payable includes only inventory purchases made on credit. Because there are no liability

accounts relating to taxes or other expenses, assume that these expenses were fully paid in cash.

Required:

1. Prepare the statement of cash flows for the year ended December 31, current year, using the indirect

method.

2. Based on the cash flow statement, write a short paragraph explaining the major sources and uses of

cash during the current yea