Question

Consultex, Inc., was founded in 2015 as a small financial consulting business. The company had done reasonably well in 2015–2017 but started noticing its cash dwindle early in 2018. In January 2018, Consultex had paid $12,500 to purchase land and repaid $4,000 principal on an existing promissory note. In March, the company paid $1,300 cash for dividends and $1,200 to repurchase and eliminate Consultex stock that had previously been issued for $1,200. To improve its cash position, Consultex borrowed $4,300 by signing a new promissory note in May and also issued stock to a new private investor for $11,300 cash. Year-end comparative balance sheets and income statements are presented below. CONSULTEX, INC. Balance Sheet October 31 2018 2017 Assets Cash $ 8,130 $ 10,800 Accounts Receivable 12,600 11,300 Prepaid Rent 1,650 2,300 Land 24,500 12,000 Total Assets $ 46,880 $ 36,400 Liabilities and Stockholders’ Equity Salaries and Wages Payable $ 1,650 $ 2,300 Income Taxes Payable 1,200 1,200 Notes Payable (long-term) 11,600 11,300 Common Stock 18,400 8,300 Retained Earnings 14,030 13,300 Total Liabilities and Stockholders’ Equity $ 46,880 $ 36,400 CONSULTEX, INC. Income Statement For the Year Ended October 31 2018 2017 Sales Revenue $ 154,500 $ 157,500 Salaries and Wages Expense 97,300 96,300 Rent Expense 35,300 29,300 Utilities Expenses 19,000 19,300 Income before Income Tax Expense 2,900 12,600 Income Tax Expense 870 3,780 Net Income $ 2,030 $ 8,820 Required: Prepare a properly formatted Statement of Cash Flows for Consultex, Inc., for the year ended October 31, 2018 (using the indirect method). (Amounts to be deducted should be indicated with a minus sign.)

CONSULTEX, INC.
Balance Sheet
October 31
	2018			2017
Assets
Cash	$	8,130		$	10,800
Accounts Receivable		12,600			11,300
Prepaid Rent		1,650			2,300
Land		24,500			12,000
Total Assets	$	46,880		$	36,400
Liabilities and Stockholders’ Equity
Salaries and Wages Payable	$	1,650		$	2,300
Income Taxes Payable		1,200			1,200
Notes Payable (long-term)		11,600			11,300
Common Stock		18,400			8,300
Retained Earnings		14,030			13,300
Total Liabilities and Stockholders’ Equity	$	46,880		$	36,400

CONSULTEX, INC.
Income Statement
For the Year Ended October 31
	2018			2017
Sales Revenue	$	154,500		$	157,500
Salaries and Wages Expense		97,300			96,300
Rent Expense		35,300			29,300
Utilities Expenses		19,000			19,300
Income before Income Tax Expense		2,900			12,600
Income Tax Expense		870			3,780
Net Income	$	2,030		$	8,820

Required:

1. Prepare a properly formatted Statement of Cash Flows for Consultex, Inc., for the year ended October 31, 2018 (using the indirect method). (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer-1)-

CONSULTEX INC.
STATEMENT OF CASH FLOWS PARTIAL (USING INDIRECT METHOD)
FOR THE YEAR ENDED OCTOBER 31,2018
Particulars		Amount
		$
Cash flow from operating activities
Net Income		2030
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Change in operating assets & liabilities
Increase in accounts receivable		-1300
Decrease in prepaid expenses		650
Increase in salaries & wages payable		-650
Net cash flow from operating activities (a)		730
Cash Flow from Investing activities
Land purchased		-12500
Net cash Flow from Investing activities (b)		-12500
Cash Flow from Financing activities
Cash dividends paid		-1300
Common stock purchased		-1200
Common stock issued		11300
Promissory notes paid		-4000
New promissory notes issued		4300
Net cash Flow from Financing activities (c)		9100
Net Change in cash c=a+b+c		-2670
Beginning cash balance		10800
Closing cash balance		8130