Question

On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $84,200 in assets in exchange for its common stock to launch the business. On October 31, the company’s records show the following items and amounts. Retained earnings, October 1 as $0. [8:47 PM] Also assume the following: The owner’s initial investment consists of $38,170 cash and $46,030 in land in exchange for its common stock. The company’s $18,170 equipment purchase is paid in cash. The accounts payable balance of $8,630 consists of the $3,450 office supplies purchase and $5,180 in employee salaries yet to be paid. The company’s rent, telephone, and miscellaneous expenses are paid in cash. No cash has been collected on the $14,600 consulting fees earned. Using the above information prepare an October 31 statement of cash flows for Ernst Consulting. (Cash outflows should be indicated by a minus sign.)

Answer 1

Answer:

Ernst Consulting

Statement of cash flows for the month end, October 31.

Cash Flow From Operating Activities

Consulting Fees Earned                                               $14,600

Less Expenses                                                              ($8,630)

Net Profit                                                                         $5,970

Adjustment for :

Accounts payable ($3,450 +  $5,180)                          $8,630

Accounts receivables                                                 ($14,600)

Net Cash Flow from Operating Activities                        $0

Cash Flow From Investing Activities

Purchase of Equipment                                               ($18,170)

Net Cash Flow from Investing Activities                    ($18,170)

Cash Flow From Financing Activities

Common Stock Issue                                                   $38,170

Net Cash Flow from Financing Activities                    $38,170

Movement during the Month                                     $20,000

Cash and Cash Equivalents at the Beginning                $0

Cash and Cash Equivalents at the End                    $20,000

Explanation:

Statement of Cash flow only records items that involve movement in cash under the categories of : Cash from Operating Activities, Cash from Investing Activities and Cash from Financing Activities.