Question
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:
- 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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