Consultex, Inc. was founded in 2012 as a small financial consulting business. Th

Question

Consultex, Inc. was founded in 2012 as a small financial consulting business. The company had done reasonably well in 2012–2014 but started noticing its cash dwindle early in 2015. In January 2015, Consultex had paid $18,500 to purchase land and repaid $2,000 principal on an existing promissory note. In March, the company paid $2,500 cash for dividends and $1,200 to repurchase Consultex stock that had previously been issued for $1,200. To improve its cash position, Consultex borrowed $5,500 by signing a new promissory note in May and also issued stock to a new private investor for $12,500 cash. Year-end comparative balance sheets and income statements are presented below.

Explanation / Answer

Cash Flow Statement Particulars Amount ($) Cash flow from operating activities Net Income               3,710 Adjustments to reconcile net income to net cash flow from operating activities: Changes in Current Assets and Liabilities Less: Increase in current assets Account Receivable           (2,500) Add: decrease in current assets Prepaid rent             1,250 Less: decrease in current liabilities Salaries and Wages payable -1250            (2,500) cash generated from operating activities               1,210 Cash flow from investing activities Purchase of Land        (18,500)          (18,500) Cash flow from financing activities Proceeds from Issue of Common Stock           12,500 issue of Notes Payable             5,500 Payment of Promissory note           (2,000) Payment of Dividend           (2,500) Purchase of treasury stock           (1,200)            12,300 Total Cash Flow Add: beginning Cash            13,200 Cash at the end               8,210

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