Preparing a Statement of Cash Flows (Indirect Method)

Audio City, Inc. is developing its annual financial statements at December 31. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized below:

	Current Year			Prior Year
Balance Sheet at December 31
Cash	$	64,000		$	65,000
Accounts Receivable		15,000			20,000
Inventory		22,000			20,000
Property and Equipment		210,000			150,000
Less: Accumulated Depreciation		(60,000)			(45,000)
	$	251,000		$	210,000
Accounts Payable	$	8,000		$	19,000
Taxes Payable		2,000			1,000
Note Payable (long-term)		86,000			75,000
Contributed capital		75,000			70,000
Retained Earnings		80,000			45,000
	$	251,000		$	210,000
Income Statement for Current Year
Sales	$	190,000
Cost of Goods Sold		90,000
Other Expenses		60,000
Net Income	$	40,000

Additional Data:

a.	Bought equipment for cash, $60,000.
b.	Borrowed an additional $11,000 and signed an additional long-term note payable.
c.	Issued new shares of stock for $5,000 cash.
d.	Dividends of $5,000 were paid in cash.
e.	Other expenses included depreciation, $15,000; salaries and wages, $20,000; taxes, $25,000.
f.	Accounts Payable includes only inventory purchases made on credit.

Required:

1. 2.

Prepare the statement of cash flows for the current year ended December 31 using the indirect method. Based on the cash flow statement, write a short paragraph explaining the major sources and uses of cash during the current year.