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.
