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 $12,000 to purchase land and repaid $4,000 principal on an existing promissory note. In March, the company paid $1,200 cash for dividends and $1,000 to repurchase Consultex stock that had previously been issued for $1,000. To improve its cash position, Consultex borrowed $4,200 by signing a new promissory note in May and also issued stock to a new private investor for $11,200 cash. Year-end comparative balance sheets and income statements are presented below. CONSULTEX, INC. Balance Sheet October 31 2015 2014 Assets Cash Accounts Receivable Prepaid Rent Land $10,290 $ 12,400 11,200 2,200 10,000 12,400 1,600 22,000 Total Assets $46,290 S35,800 Liabilities and Stockholders' Equity Salaries and Wages Payable Income Taxes Payable Notes Payable (long-term) Common Stock Retained Earnings S 1,600 2,200 1,000 11,200 8,200 13,890 13,200 1,000 11,400 18,400 Total Liabilities and Stockholders' Equity $46,290 $35,800 CONSULTEX, INC Income Statement For the Year Ended October 31 2015 2014 Sales Revenue Salaries and Wages Expense Rent Expense Utilities Expenses $154,000 $157,000 96,200 29,200 19,200 97,200 35,200 18,900 Income before Income Tax Expense Income Tax Expense 12,400 3,720 2,700 810 Net Income S 1,890 $8,680

Explanation / Answer

Cash Flow Statement Cash flow from operating activities net income for the year 1,890 adjustmets to reconcile net income to net cash flow from operating activities increase in accounts receivable -1200 decrease in prepaid rent 600 decrease in salaries & wages payable -600 -1,200 net cash flow from operating activities 690 Cash flows from investing activities purchase of land -12,000 cash used by investing activities -12,000 Cash flows from financing activity Repayment of promissory note -4,000 cash paid for dividends -1,200 cash paid for repurchase of stock -1,000 cash borrowred on promissory note 4,200 cash from stock issue 11,200 Cash provided by financing activities 9,200 net decrease in cash -2,110 cash at the beginning of the year 12,400 Cash at year end 10,290

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