Consultex Company was founded in 2014 as a small financial consulting business. The company had done reasonably well in 2014?2016, but noticed that its cash was beginning to dwindle early in 2017. In January 2017, Consultex had paid $16,000 to purchase land and repaid $2,000 principal on an existing promissory note. In March 2017, the company paid $2,000 cash in dividends and $1,000 to repurchase Consultex shares that had previously been issued for $1,000. To improve its cash position, Consultex borrowed $5,000 by signing a new promissory note in May 2017 and also issued shares to a new private investor for $12,000 cash. Comparative balance sheets and income statements for the most recent fiscal year are presented below.

Required:

1. Prepare a properly formatted statement of cash flows for Consultex for the year ended October 31, 2017 (using the indirect method).

2. What one thing can Consultex reasonably change in 2018 to avoid depleting its cash?

Transcribed Image Text:

CONSULTEX COMPANY Balance Sheet October 31 2017 2016 Assets Cash $11,000 $14,000 12,000 Accounts Receivable 14,000 Prepaid Rent 2,000 3,000 Land 26,000 10,000 $53,000 Total Assets $39,000 Liabilities and Shareholders' Equity Wages Payable $ 2,000 $ 3,000 Income Taxes Payable Notes Payable (long-term) Contributed Capital 1,000 1,000 12,000 9,000 15,000 20,000 Retained Earnings 15,000 14,000 $39,000 Total Liabilities and Shareholders' $53,000 Equity CONSULTEX COMPANY Income Statement For the Year Ended October 31 2017 2016 Sales Revenue $158,000 $161,000 Wages Expense Rent Expense 98,000 97,000 30,000 36,000 Other Operating Expenses Income before Income Tax Expense Income Tax Expense 19,700 20,000 14,000 4,200 $ 9,800 4,300 1,300 $ 3,000 Net Income