Consultex, Inc., was founded in 2015 as a small financial consulting business. The company had done reasonably well in 2015–2017 but started noticing its cash dwindle early in 2018. In January 2018, Consultex had paid $16,000 to purchase land and repaid $2,000 principal on an existing promissory note. In March, the company paid $2,000 cash for dividends and $1,000 to repurchase and eliminate Consultex stock 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 and also issued stock to a new private investor for $12,000 cash. Year-end comparative balance sheets and income statements are presented below.

Requirements:

1. Prepare a properly formatted Statement of Cash Flows for Consultex, Inc., for the year ended October 31, 2018 (using the indirect method).

2. What one thing can Consultex reasonably change in 2019 to avoid depleting its cash? 

Transcribed Image Text:

CONSULTEX, INC. Balance Sheet October 31 2018 2017 Assets $11,000 $14,000 Cash 14,000 Accounts Receivable 12,000 Prepaid Rent 3,000 2,000 Land 10,000 26,000 $53,000 $39,000 Total Assets Liabilities and Stockholders’ Equity Salaries and Wages Payable Income Taxes Payable $ 2,000 $ 3,000 1,000 1,000 Notes Payable (long-term) 15,000 12,000 9,000 Common Stock 20,000 Retained Earnings 15,000 14,000 Total Liabilities and Stockholders' Equity $53,000 $39,000 CONSULTEX, INC. Income Statement For the Year Ended October 31 2018 2017 Sales Revenue $158,000 $161,000 Salaries and Wages Expense 98,000 97,000 Rent Expense 36,000 30,000 Utilities Expenses 19,700 20,000 Income before Income Tax Expense 4,300 14,000 Income Tax Expense 1,300 4,200 Net Income $ 3,000 $ 9,800