E12-13 Preparing and Evaluating a Statement of Cash Flows (Indirect Method) from
ID: 2579514 • Letter: E
Question
E12-13 Preparing and Evaluating a Statement of Cash Flows (Indirect Method) from Comparative Balance Sheets and Income Statements [LO 12-1, LO 12-2, LO 12-3, LO 12-4, LO 12-5] 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 carly in 2015. In January 2015, Consutex had paid $20,000 to purchase land and repaid $2,000 principal on an existing promissory note. In March, the company paid $2,600 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 55,800 by signing a nevw promissory note in May and also issued stock to a nevw 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 Accounts Receivable Prepal Land $ 7,730 13,800 12,800 3,800 12,000 15,600 2,400 32,000 Total Assets $57,730 42,400 Llabilities and Stockholders Equity Salaries and Wages Payable Income Taxes Payable Notes Payable (long-term) Common Stock Retained Eamings 2,400 3,800 1.200 12,800 9,800 1,200 16,600 16,130 14,800 Total Liabilities and Stockholders Equity $57,73 42,400 CONSULTEX, INC Income Statement For the Year Ended October 31 2015 2014 Sales Revenue Salaries and Wages Expense Rent Expense Utilities Expenses $162,000 S165,000 97,800 30,800 20,800 98,800 36,800 20,500 Income before Income Tax Expense Income Tax Expense 5,900 1,770 15,600 4,680 Net Income $ 4,130 S 10,920Explanation / 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 7730Related Questions
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