Question

Pharoah Inc., a greeting card company, had the following statements prepared as of December 31, 2017....

Pharoah Inc., a greeting card company, had the following statements prepared as of December 31, 2017.

PHAROAH INC.
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2017 AND 2016

12/31/17

12/31/16

Cash

$6,100

$6,900

Accounts receivable

61,900

50,500

Short-term debt investments (available-for-sale)

34,800

18,200

Inventory

39,900

59,800

Prepaid rent

4,900

4,000

Equipment

155,500

131,200

Accumulated depreciation—equipment

(34,800

)

(25,300

)

Copyrights

45,700

50,200

Total assets

$314,000

$295,500

Accounts payable

$46,200

$39,700

Income taxes payable

4,000

6,100

Salaries and wages payable

7,900

4,000

Short-term loans payable

7,900

10,000

Long-term loans payable

59,800

68,600

Common stock, $10 par

100,000

100,000

Contributed capital, common stock

30,000

30,000

Retained earnings

58,200

37,100

Total liabilities & stockholders’ equity

$314,000

$295,500

PHAROAH INC.
INCOME STATEMENT
FOR THE YEAR ENDING DECEMBER 31, 2017

Sales revenue

$335,575

Cost of goods sold

173,200

Gross profit

162,375

Operating expenses

119,100

Operating income

43,275

Interest expense

$11,400

Gain on sale of equipment

2,000

9,400

Income before tax

33,875

Income tax expense

6,775

Net income

$27,100


Additional information:

1. Dividends in the amount of $6,000 were declared and paid during 2017.
2. Depreciation expense and amortization expense are included in operating expenses.
3. No unrealized gains or losses have occurred on the investments during the year.
4. Equipment that had a cost of $20,100 and was 70% depreciated was sold during 2017.

Prepare a statement of cash flows using the direct method.

Homework Answers

Answer #1

Statement of Cash flow

Cash flow from operating activities
Cash received from customer (335575-11400) 324175
Cash paid to supplier (173200-19900-6500) -146800
Cash paid for expense (119100+900-3900-23570-4500) -88030
Cash paid for interest -11400
Cash paid for income tax (6775+2100) -8875
Net cash provided by operating activities 69070
Cash flow from investing activities
Purchase short term debt -16600
Sale of equipment 8030
Purchase of equipment -44400
Net cash used investing activities -52970
Cash flow from financing activities
Dividend paid -6000
Repaid short term loan payable -2100
Repaid long term loan payable -8800
Net cash used in financing activities -16900
Net cash increases (Decrease) -800
Beginning Cash 6900
Ending Cash 6100
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