Audio City, Inc., 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, $60,000.
b. Borrowed an additional $10,000 and signed an additional long-term note payable.
c. Issued new shares of stock for $5,000 cash.
d. Dividends of $5,000 were declared and paid in cash.
e. Other expenses included depreciation, $15,000; wages, $20,000; taxes, $25,000.
f. Accounts payable includes only inventory purchases made on credit. Because a liability relating to taxes does not exist, assume that they 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 Inventory Property and equipment Less: Accumulated depreciation 63,000 15,000 22,000 210,000 (60,000) $250,000 $65,000 20,000 20,000 150,000 (45,000) $210,000 Accounts payable Taxes payable Note payable, long-term Contributed capital Retained earnings 8,000 2,000 85,000 75,000 80,000 $250,000 $ 19,000 1,000 75,000 70,000 45,000 $210,000 Income statement for 2010 Sales Cost of goods sold Other expenses Net income $190,000 90,000 60,000 $ 40,000