?E$12-13$Preparing and Evaluating a Statement of Cash Flows $($Indirect Method$)$ ?from Comparative Balance Sheets and Income Statements

Consultex, Inc., was founded in $2018$ ?as a small financial consulting business. The company had done reasonably well in $20182020$ ?but started noticing its cash dwindle early in $2021.$ ?In January $2021,$ ?Consultex had paid $$16,000$ ?to purchase land and repaid $$2,000$ ?principal on an existing promissory note. In March, the company paid $$2,000$ ?cash for dividends and $$1,000$ ?to repurchase and eliminate Consultex stock that had previously been issued for $$1,000.$ ?To improve its cash position, Consultex borrowed $$5,000$ ?by signing a new promissory note in May and also issued stock to a new private investor for $$12,000$ ?cash. Year$-$end comparative balance sheets and income statements are presented below.

CONSULTEX, INC.

Balance Sheet

October $31$

$$

$2021$

$2020$

Assets

$$

$$

Cash

$$11,000$

$$14,000$

Accounts Receivable

$14,000$

$12,000$

Prepaid Rent

$2,000$

$3,000$

Land

$26,000$

$10,000$

Total Assets

$$53,000$

$$39,000$

Liabilities and Stockholders$$ ?Equity

Salaries and Wages Payable

$ $2,000$

$ $3,000$

Income Taxes Payable

$1,000$

$1,000$

Notes Payable $($long$-$term$)$

$15,000$

$12,000$

Common Stock

$20,000$

$9,000$

Retained Earnings

$15,000$

$14,000$

Total Liabilities and Stockholders$$ ?Equity

$$53,000$

$$39,000$

CONSULTEX, INC.

Income Statement

For the Year Ended October $31$

$$

$2021$

$2020$

Sales Revenue

$$158,000$

$$161,000$

Salaries and Wages Expense

$98,000$

$97,000$

Rent Expense

$36,000$

$30,000$

Utilities Expenses

$19,700$

$20,000$

Income before Income Tax Expense

$4,300$

$14,000$

Income Tax Expense

$1,300$

$4,200$

Net Income

$$??3,000$

$$??9,800$

Requirements:

Prepare a properly formatted Statement of Cash Flows for Consultex, Inc., for the year ended October $31,2021($using the indirect method$).$

What one thing can Consultex reasonably change in $2022$ ?to avoid depleting its cash?