Question

Please assist me in preparing the statement of cash flows for this problem. I need to grasps a better understanding, thank you.

Pharoah Company Comparative Balance Sheets December 31 2019 2018 Cash $ 17,000 $17,500 Accounts receivable 25,000 22,400 Investments 19,850 16,050 Equipment 60,050 69,750 Accumulated depreciation-equipment (13,750) (10,400) Total $108,150 $115,300 Accounts payable Bonds payable Common stock Retained earnings Total $ 14,750 $ 11,250 10,400 30,000 49,500 45,200 33,500 28,850 $108,150 $115,300 Additional information: 1. Net income was $18,450. Dividends declared and paid were $13,800. 2. Equipment which cost $9,700 and had accumulated depreciation of $1,700 was sold for $3,300. 3. No noncash investing and financing activities occurred during 2019. Prepare a statement of cash flows for 2019 using the indirect method. (Show amounts that decrease cash flow with either a-sign e.g. -45,000, or in Pharoah Company Statement of Cash Flows Adjustments to reconcile net income to

Here are the accounts for the drop down

Answer 1

Solution

Pharoah Company
Cash Flow Statement
For the ended december 31, 2019
Cash Flow from Operating Activities:
Net Income		$      18,450.00
Adjustments to reconcile net income to
Net cash flow from operating activities
Depreciation expense	$          5,050.00
Loss on disposal of plant asset	$          4,700.00
Increase In accounts receivable	$       (2,600.00)
Increase in accounts payable	$          3,500.00
		$      10,650.00
Net Cash Provided by Operating Activities		$      29,100.00
Cash Flow from Investing Activities:
Sale of Equipment	$          3,300.00
Purchase of Investment	$       (3,800.00)
B. Cash flow from Investing Activities		$          (500.00)
Cash Flow from Financing Activities:
Issue of Common Stock	$          4,300.00
Dividend paid	$     (13,800.00)
Redemption of bonds	$     (19,600.00)
C. Cash Flow from Financing Activities		$    (29,100.00)
Net Decrease in cash [A+B+C]		$          (500.00)
Add: cash at the beginning of the year		$      17,500.00
Cash at the end of the year		$      17,000.00

.General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.