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PEN AND INK Limited is the largest manufacturer of stationery in Namibia. The statement of profit or loss, statement of changes in equity of PEN AND INK Limited for the year ended 31 December 2022, as well as the statement of financial position of the company as at 31 December 2022, are shown below: PEN AND INK LIMITED Statement of profit or loss for the year ended 31 December 2022 N$ Sales 300,000 Cost of sales (200,000) Gross profit 100,000 Operating expenses (26,000) Selling expenses 10,000 Administration expenses 7,000 Loss on disposal of equipment 1,000 Depreciation 8,000 Profit before tax 74,000 Income tax expense (29,600) Profit for the period 44,400 PEN AND INK LIMITED Statement of Financial Position as at 31 December 2022 2022 2021 N$ N$ ASSETS Non- current assets 85,000 80,000 Equipment at cost 100,000 89,000 Accumulated depreciation (15,000) (9,000) Current assets 109,800 70,500 Inventories 60,000 40,000 Accounts receivable 12,000 20,000 Selling expenses paid in advance 1,200 1,500 Bank 36,600 9,000 194,800 150,500 EQUITY AND LIABILITIES Equity Share capital 110,000 100,000 Retained earnings 34,400 10,000 Non-current liabilities Loan 10,000 20,000 Current liabilities Account payable 20,600 10,000 Administration expenses payable 800 500 Current tax payable: income tax 19,000 10,000 194,800 150,500 PEN AND INK LIMITED Statement of changes in equity for the year ended 31 December 2022 Share capital Retained earnings Total N$ N$ N$ Balance at 01/01/2021 100,000 10,000 110,000 Profit for the period 44,400 44,400 Dividends (20,000) (20,000) Issue of share capital 10,000 10,000 Balance at 31/12/2022 110,000 34,400 144,400 Equipment costing N$15,000 was purchased during the year when certain other equipment was traded in as part of the purchase price. REQUIRED: a) Prepare the statement of cash flows of PEN AND INK LIMITED for the year ended 31 December 2022 using the direct method. (20 marks) b) Prepare the note to the statement of cash flows for the reconciliation of profit before tax to cash generated from profits for the year ended 31 December 2022. (10 marks)

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