Question

Pharoah Ltd., a private company reporting under ASPE, reported the following for the years ended May 31, 2021, and 2020.

PHAROAH LTD. Balance Sheet May 31
Assets		2021			2020
Cash		$20,900			$43,250
Accounts receivable		83,750			75,250
Inventory		170,000			156,250
Prepaid expenses		4,500			6,000
Land		118,250			72,500
Equipment		305,000			185,000
Accumulated depreciation		(63,200	)		(36,250	)
Total assets		$639,200			$502,000
Liabilities and Shareholders’ Equity
Accounts payable		$40,750			$36,250
Dividends payable		6,000			4,500
Income taxes payable		1,700			5,500
Mortgage payable		117,000			76,250
Common shares		211,500			162,250
Retained earnings		262,250			217,250
Total liabilities and shareholders’ equity		$639,200			$502,000

Additional Information:
1.		Profit for 2021 was $104,250.
2.		Common shares were issued for $49,250.
3.		Land with a cost of $49,250 was sold at a loss of $18,500.
4.		Purchased land with a cost of $95,000 with a $54,250 down payment and financed the remainder with a mortgage note payable.
5.		No equipment was sold during 2021.

Prepare a cash flow statement for the year using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

PHAROAH LTD. Cash Flow Statement - Indirect Method

Note X: Land with as cost of $

was purchased by paying $

cash and issuing a mortgage note payable for

Answer 1

Statement of Cash Flows - Indirect Approach
	$ In Millions	$ In Millions
Net income		$          1,04,250
Cash flows from operating activities
Adjustments for reconcile the net income to:
Depreciation	$             26,950
Loss on Sale of Land	$             18,500
Increase in account receivable	$              -8,500
Increase in inventory	$            -13,750
Increase on account payable	$                4,500
Decrease in Income tax Payable	$              -3,800
Decrease in Prepaid Expenses	$                1,500
		$             25,400
Net cash from operating activities		$          1,29,650
Cash flows from investing activities
Purchase of Equipment	$        -1,20,000
Purchase of Land	$            -54,250
Sale of Land	$             30,750
Net cash used in investing activities		$        -1,43,500
Cash flows from Financing activities
Issue of Common Shares	$             49,250
Dividend Paid	$            -57,750
Net cash used in financing activities		$              -8,500
Net increase in cash and cash equivalents		$            -22,350
Add :Cash and cash equivalents at beginning of period		$             43,250
Cash and cash equivalents at end of period		$             20,900
CALCULATION OF DIVIDEND PAID :
Net Profit	$          1,04,250
Add: Beginning Balance of retained earning	$          2,17,250
Total	$          3,21,500
Less: Ending balance of retained earnings	$          2,62,250
Net dividend declared	$             59,250
Less: Change in Dividend Payable	$                1,500
Net Dividend paid in Cash	$             57,750