Question

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On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $83,110 in assets to launch the business. On October 31, the company’s records show the following items and amounts.  

Cash$14,550. Cash withdrawals by owner$1,120

Accounts receivable12,940. Consulting revenue12,940

Office supplies2,400 Rent expense2,640

Land45,860. Salaries expense5,920

Office equipment17,020. Telephone expense800

Accounts payable7,820. Miscellaneous expenses620

Owner investments83,110  

Also assume the following:  

The owner’s initial investment consists of $37,250 cash and $45,860 in land.

The company’s $17,020 equipment purchase is paid in cash.

The accounts payable balance of $7,820 consists of the $2,400 office supplies purchase and $5,420 in employee salaries yet to be paid.

The company’s rent, telephone, and miscellaneous expenses are paid in cash.

No cash has been collected on the $12,940 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.)

	ERNST CONSULTING Statement of Cash Flows For Month Ended October 31 Cash flows from operating activities Cash received from customers $0 $0 Cash flows from investing activities 0 Cash flows from financing activities 0 Cash balance, October 1 Cash balance, October 31 $0

Answer 1

Cash flow

Particulars	Amount
Cash flow from operating activities
Cash rec from customer	$0
Rent expense paid	($2640)
Telephone expense	($800)
Misc expense	($620)
Salary paid ($5920-$5420)	($500)
	$4560
Cash flow from investing activity
Equipment purchase	($17020)
	($17020)
Cash flow from financial activity
Cash withdrawal by owner	($1120)
Owner's investment	$37250
	$36130
Closing cash balance	$14550