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Q2: Consultex, Incorporated, was founded in 2018 as a small financial consulting business. The company had done reasonably well from 2018 through 2020 but started

Q2:

Consultex, Incorporated, was founded in 2018 as a small financial consulting business. The company had done reasonably well from 2018 through 2020 but started noticing its cash dwindle early in 2021. In January 2021, Consultex had paid $12,500 to purchase land and repaid $4,000 principal on an existing promissory note. In March, the company paid $1,300 cash for dividends and $1,200 to repurchase and eliminate Consultex stock that had previously been issued for $1,200. To improve its cash position, Consultex borrowed $4,300 by signing a new promissory note in May and also issued stock to a new private investor for $11,300 cash. Year-end comparative balance sheets and income statements are presented below.

CONSULTEX, INCORPORATED

Balance Sheet

October 31

2021

2020

Assets

Cash

$ 8,130

$ 10,800

Accounts Receivable

12,600

11,300

Prepaid Rent

1,650

2,300

Land

24,500

12,000

Total Assets

$ 46,880

$ 36,400

Liabilities and Stockholders Equity

Salaries and Wages Payable

$ 1,650

$ 2,300

Income Taxes Payable

1,200

1,200

Notes Payable (long-term)

11,600

11,300

Common Stock

18,400

8,300

Retained Earnings

14,030

13,300

Total Liabilities and Stockholders Equity

$ 46,880

$ 36,400

CONSULTEX, INCORPORATED

Income Statement

For the Year Ended October 31

2021

2020

Sales Revenue

$ 154,500

$ 157,500

Salaries and Wages Expense

97,300

96,300

Rent Expense

35,300

29,300

Utilities Expenses

19,000

19,300

Income before Income Tax Expense

2,900

12,600

Income Tax Expense

870

3,780

Net Income

$ 2,030

$ 8,820

Required:

  1. Prepare a properly formatted Statement of Cash Flows for Consultex, Incorporated, for the year ended October 31, 2021 (using the indirect method). (Amounts to be deducted should be indicated with a minus sign.)

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