The income statement and unclassified statement of financial position for Pharoah, Inc. follow: PHAROAH, INC. Statement of Financial Position December 31 Assets Cash Held for trading investments Accounts receivable Inventory Prepaid expenses Property, plant, and equipment Accumulated depreciation 2018 2017 $98,800 $48,500 129,000 115,500 71,500 41,200 122,100 94,400 19,000 28,200 284,500 254,000 (50,000) (54,000) $674,900 $527,800 Total assets Liabilities and Shareholders' Equity Accounts payable $99,500 $78,300 Accrued liabilities 10,000 7,900 Bank loan payable 78,400 149,600 Common shares 240,000 165,000 Retained earnings 247,000 127,000 Total liabilities and shareholders' equity $674,900 $527,800 Sales Cost of goods sold Gross profit PHAROAH, INC. Income Statement Year Ended December 31, 2018 Operating expenses Income from operations Other revenues and expenses Unrealized gain on held for trading investments $13,500 Interest expense (4,750) Income before income tax Income tax expense Net income Additional information: $503,550 187,050 316,500 116,400 200,100 8,750 208,850 42,000 $166,850 1. Prepaid expenses and accrued liabilities relate to operating expenses. 2. An unrealized gain on held for trading investments of $13,500 was recorded. 3. New equipment costing $89,000 was purchased for $22,700 cash and a $66,300 long-term bank loan payable. 4. Old equipment having an original cost of $58,500 was sold for $1,900. 5. Accounts payable relate to merchandise creditors. 6. Some of the bank loan was repaid during the year. 7. A dividend was paid during the year. 8. Operating expenses include $46,600 of depreciation expense and a $6,000 loss on disposal of equipment. (a) Prepare the statement of cash flows, using the direct method. (Show amounts that decrease cash flow with either a-sign e.g. -15,000 or in parenthesis e.g. (15,000).) Cash Payments PHAROAH, INC. Statement of Cash Flows-Direct Method + + + + + $ $ + + + + + + + + $ $ Note X to the Statement of Cash Flows: During the year, the company purchased equipment costing $ paying $22,700 cash and issuing a $66,300 bank loan payable. by