Reference no: EM132776617
Question - Pharoah Inc. is a major retailer of road bicycles and a promoter of riding bicycles to work, both to save the environment and improve physical fitness. Financial statements for Pharoah are presented below.
Current Assets 2021 2020
Cash 55,900 20,150
Accounts receivable 25,500 10,800
Inventory 31,750 16,750
Prepaid expenses 15,150 10,150
Property and Equipment
Property and equipment 160,200 150,200
Accumulated depreciation 78,900 70,000
Current liabilities
Accounts payable 12,100 16,000
Salaries payable 10,150 8,150
Interest payable 2,800 3,800
Non-current Liabilities
Loan payable 100,200 60,200
Shareholder's Equity
Common Shares 9,850 350
Retained earnings 74,500 49,550
Income Statement (2021)
Sales revenue 614,550
Cost of sales 420,000
Gross margin 194,550
Expenses
Salary expense 136,000
Interest expense 3,500
Other expenses 6,000
Depreciation expense 14,900
Operating income 34,150
Gain on disposal 1,450
of equipment
Income tax expense 6,400
Net income 29,200
The following is additional information concerning Pharoah's transactions during the year ended December 31, 2021:
Equipment costing $40,000 was purchased by paying $34,550 cash and issuing 100 shares.
Equipment costing $30,000 that was purchased at the beginning of 2020 was sold at the end of 2021 for $25,450. Straight-line depreciation had been used with an expected asset life of 10 years and a residual value of $0.
The "other expenses" relate to prepaid items.
In order to supplement its cash, Pharoah borrowed an additional $40,000.
Cash dividends of $4,250 were paid at the end of the fiscal year.
Cost of sales includes $125,000 of direct labour costs.
Required - Make a statement of cash flows for Pharoah for the year ended December 31, 2021, using the direct method.