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 $20,000 to purchase land and repaid $2,000 principal on an existing promissory note. In March, the company paid $2,800 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 $5,800 by signing a new promissory note in May and also issued stock to a new private investor for $12,800 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 $ 7,730 13,800 12,800 3.800 12,000 15,600 2,400 32,000 Total Assets $57,730 42,400 Liabilities and Stockholders' Equity Salaries and Wages Payabl Income Taxes Pavable Notes Payable (long-term) Common Stock Retained Earnings $2,400 3,800 1.200 12,800 9,800 14,800 1,200 16,600 21,400 16,130 Total Liabilities and Stockholders Equity 57,730 42,400 CONSULTEX, INC Income Statement For the Year Ended October 31 2015 2014 Sales Revenue Salaries and Wages Rent Expense Utilities Expenses $162,000 165,000 97,800 30,800 20,800 98,800 36,800 20,500 nse Income before Income Tax Expense Income Tax Expense 5,900 1,770 15,600 4,680 Net Income $ 4,130 10,920

Explanation / Answer

Statement of cash flow (indirect method )

Cash flow from operating activities Net income 4130 Adjustment to reconcile net income Increase account receivable (2800) Decrease prepaid rent 1400 Decrease salary and wages payable (1400) Net cash flow from operating activities 1330 cash flow from investing activities Purchase of land (20000) Net cash flow from investing activities (20000) Cash flow from financing activities Repaid long term notes payable (2000) Borrow from long term notes payable 5800 Issue common stock 12800 Repurchase treasury stock (1200) Dividend paid (2800) Net cash flow from financing activities 12600 Net cash flow 6070 Beginning cash 13800 Ending cash 7730

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