question # 2

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.

income statement:

INCOME STATEMENT AND STATEMENT OF FINANCIAL POSITION PHOTOS ATTACHED:

The following is additional information concerning Pharoahs 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

Prepare a statement of cash flows for Pharoah for the year ended December 31, 2021, using the direct method. PLEASE SHOW CALCULATIONS THANK YOU

2020 STATEMENT OF FINANCIAL POSITION December 31 Current Assets 2021 Cash 55.900 Accounts receivable 25,500 Inventory 31,750 Prepaid expenses 15.150 Total current assets 128,300 Property and Equipment Property and equipment 160.200 Less: Accumulated depreciation 78.900 Net property and equipment 81,300 20.150 10.800 16.750 10.150 57.850 150.200 70.000 80,200 TOTAL ASSETS $209,600 $138.050 16,000 Current Liabilities Accounts payable Salaries payable Interest payable Total current liabilities Loan payable Total Liabilities Shareholders' Equity 12.100 10.150 2.800 25.050 100.200 125.250 8,150 3.800 27.950 60,200 88,150 Common shares Retained earnings Total shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 9,850 74.500 84,350 $209,600 350 49.550 49.900 $138.050 INCOME STATEMENT For the Years Ended December 31 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 2020 500,000 350,000 150,000 125,000 2,400 3,000 8.000 11.600 Operating income Gain on disposal of equipment Income tax expense Net income 34.150 1,450 6,400 $29,200 1.972 $9,628