XS Supply Company is developing its annual financial statements at December 31, 2010. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:

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, 2010, using the indirect method.
2. Based on the cash flow statement, write a short paragraph explaining the major sources and uses of cash during2010.

2010 2009 Balance sheet at December 31 Cash Accounts receivable Merchandise inventory Property and equipment Less: Accumulated depreciation $ 34,000 35,000 41,000 121,000 (30,000) $201,000 29,000 28,000 38,000 100,000 (25,000) 170,000 Accounts payable Accrued expenses Note payable, long-term Contributed capital Retained earnings $ 36,000 1,200 38,000 88,600 37,200 $201,000 S 27,000 1,400 44,000 72,600 25,000 170,000 Income statement for 2009 Sales Cost of goods sold Other expenses Net income $120,000 70,000 37,800 $12,200