Question

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On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $84,200 in assets in exchange for its common stock to launch the business. On October 31, the company’s records show the following items and amounts.

Cash	$	10,710		Cash dividends	$	2,180
Accounts receivable		14,800		Consulting revenue		14,800
Office supplies		3,450		Rent expense		3,750
Land		46,030		Salaries expense		7,160
Office equipment		18,170		Telephone expense		780
Accounts payable		8,630		Miscellaneous expenses		600
Common Stock		84,200

Also assume the following:

1. The owner’s initial investment consists of $38,170 cash and $46,030 in land in exchange for its common stock..
2. The company’s $18,170 equipment purchase is paid in cash.
3. The accounts payable balance of $8,630 consists of the $3,450 office supplies purchase and $5,180 in employee salaries yet to be paid.
4. The company’s rent, telephone, and miscellaneous expenses are paid in cash.
5. No cash has been collected on the $14,800 consulting fees earned.

Using the above information prepare an October 31 statement of cash flows for Ernst Consulting. (Cash outflows should be indicated by a minus sign.)

Answer 1

--Requirement, as asked

ERNST CONSULTING
Statement of Cash Flows
For Month Ended October 31
Cash flows from Operating activities:
Cash received from customers	$0
Cash paid for Rent	($3,750)
Cash paid for telephone	($780)
Cash paid for Misc expense	($600)
Cash paid for salaries [7160 - 5180]	($1,980)
Net cash flows provided (used) by Operating activities		($7,110)
Cash flows from investing activities:
Cash paid to acquire Equipment	($18,170)
Net Cash flows provided (used) by Investing activities		($18,170)
Cash flows from financing activities:
Cash flow from capital investments	$38,170
Cash paid for dividend	($2,180)
Net Cash flows provided by Financing activities		$35,990
Net Increase (decrease) in Cash		$10,710
Cash balance, Oct 1		$0
Cash balance, Oct 31		$10,710