The income statement for Pharoah Ltd., a private company following ASPE, is pres

Question

The income statement for Pharoah Ltd., a private company following ASPE, is presented here:

Additional information:

Income tax payable increased by $29,000.

Prepare the operating activities section of the statement of cash flows, using the indirect method.

PHAROAH LTD.
Income Statement
Year Ended November 30, 2018 Sales $8,200,000 Cost of goods sold 4,450,000 Gross profit 3,750,000 Operating expenses 2,030,000 Income from operations 1,720,000 Interest expense 115,000 Income before income tax 1,605,000 Income tax expense 370,000 Net income $1,235,000

Explanation / Answer

Pharoah Ltd.

Statement of Cash Flows ( Partial)

For the year ended November 30, 2018

$ $ Cash Flows from Operating Activities Income Before Income Tax 1,605,000 Adjustments to reconcile net income to net cash flows from operations Depreciation Expense 77,000 Impairment Loss 108,000 Interest Expense 115,000 Increase in Accounts Receivable (186,000) Decrease in Inventory 51,000 Increase in Prepaid Expenses (46,000) Decrease in Accounts Payable (181,000) Decrease in Accrued Liabilities (95,000) Decrease in Unearned Revenue (16,000) (173,000) Cash Flows before Income Taxes 1,432,000 Income Taxes Paid 341,000 Net cash flows from Operating Activities 1,091,000

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