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On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $83,220 in...

On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $83,220 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.  

Cash $ 13,840 Cash dividends $ 1,280
Accounts receivable 12,000 Consulting revenue 12,000
Office supplies 2,530 Rent expense 2,770
Land 45,840 Salaries expense 6,120
Office equipment 17,200 Telephone expense 820
Accounts payable 7,810 Miscellaneous expenses 630
Common Stock 83,220

Also assume the following:

  1. The owner’s initial investment consists of $37,380 cash and $45,840 in land in exchange for its common stock..
  2. The company’s $17,200 equipment purchase is paid in cash.
  3. The accounts payable balance of $7,810 consists of the $2,530 office supplies purchase and $5,280 in employee salaries yet to be paid.
  4. The company’s rent, telephone, and miscellaneous expenses are paid in cash.
  5. No cash has been collected on the $12,000 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.)

Solutions

Expert Solution

Ernst Consulting

Cash Flow Statement

for the month ended October 31

Cash flows from Operating Activities $ $
Cash received from customers 0
Cash paid for Rent (2,770)
Cash paid for telephone (820)
Cash paid for Miscellaneous expense (630)
Cash paid for salaries [6,120 - 5,280 ] (840)
Net cash flows provided (used) by Operating activities (5,060)
Cash flows from Investing Activities
Cash paid for aquiring equipment (17,200)
Net cash flows provided (used) by Investing activities (17,200)
Cash flows from Financing Activities
Cash flow from capital investments 37,380
Cash paid for dividend (1,280)
Net cash flows provided (used) by Financing activities 36,100
Net Increase (decrease) in Cash 13,840
Cash balance, Oct 1 0
Cash balance, Oct 31 13,840

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