The income statement and unclassified statement of financial position for Pharoah, Inc. follow: PHAROAH, INC. Statement of Financial Position December 31 Assets 2018 2017 Cash $98,800 $48,500 Held for trading investments 129,000 115,500 Accounts receivable 71,500 41,200 Inventory 122,100 94,400 Prepaid expenses 19,000 28,200 Property, plant, and equipment 284,500 254,000 Accumulated depreciation (50,000) (54,000) Total assets $674,900 $527,800 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 PHAROAH, INC. Income Statement Year Ended December 31, 2018 Sales $503,550 Cost of goods sold 187,050 Gross profit 316,500 Operating expenses 116,400 Income from operations 200,100 Other revenues and expenses Unrealized gain on held for trading investments $13,500 Interest expense (4,750 ) 8,750 Income before income tax 208,850 Income tax expense 42,000 Net income $166,850 Additional information: 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).) PHAROAH, INC. Statement of Cash Flows-Direct Method $ Cash Payments $ $ $ ( > > > > > $ by 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