Answer and Explanation:
The Preparation of statement of cash flows for Ernst Consulting is shown below:-
<u>Ernst Consulting</u>
<u>Cash Flows from Operating Activities</u>
<u>Particulars                                                                          Amount</u>
Paid cash to employees                          ($840)
Paid cash for rent                                     ($2,770)
Paid cash for telephone expense            ($820)
Paid cash for miscellaneous expenses    ($630)
Net cash used in Operating Activities                            ($5,060
)
Cash Flows from Investing Activities  
Paid cash for purchase of equipment      ($17,200)
Net cash used in Investing Activities                             ($17,200
)
Cash Flows from Financing Activities
Cash invested by owner                            $37,380  
Cash dividends                                           ($1,280)  
Net cash flows provided by Financing Activities          $36,100
Net increase ( decrease) in cash                                       $13,840
Cash balance, October 1                                                       0
Cash balance, October 31                                                   $13,840
Therefore we have considered cash inflow presented in positive amount 
while cash outflow in negative amount.