To prepare the cash flow statement for Aunt Rhea Corporation for the year 2015 using the indirect method, you need to analyze the changes in the company's balance sheet accounts and adjust them for the effects of the company's operating, investing, and financing activities. Let's go through each section step by step:
1. Operating Activities:
- Start with Net Income ($120,000) from the income statement.
- Add back non-cash expenses such as depreciation ($30,000).
- Adjust for changes in operating assets and liabilities:
- Increase in Accounts Receivable ($20,000): Deducted from the net income.
- Decrease in Merchandise Inventory ($10,000): Added to the net income.
- Decrease in Supplies ($10,000): Added to the net income.
- Increase in Accounts Payable ($10,000): Deducted from the net income.
- Decrease in Income Taxes Payable ($5,000): Added to the net income.
- Calculate the Net Cash Provided by Operating Activities.
2. Investing Activities:
- Include the sale of long-term investments ($55,000): Added to the net cash provided by operating activities.
- Calculate the Net Cash Provided by Investing Activities.
3. Financing Activities:
- Include the issuance of common stock ($100,000): Added to the net cash provided by operating activities.
- Include the payment of cash dividends ($80,000): Deducted from the net cash provided by operating activities.
- Calculate the Net Cash Provided by Financing Activities.
4. Calculate the Net Increase in Cash:
- Add the Net Cash Provided by Operating Activities, Net Cash Provided by Investing Activities, and Net Cash Provided by Financing Activities.
5. Calculate the Ending Cash Balance:
- Add the Net Increase in Cash to the Beginning Cash Balance for 2015 ($655,000).
Now that you have all the necessary information from the provided data, you can prepare the cash flow statement for Aunt Rhea Corporation for 2015 using the indirect method.