Squirrel Tree Services reports the following amounts on December 31.
Assets Liabilities and Stockholders’ Equity
Cash $ 8,700 Accounts payable $ 9,600
Supplies 1,700 Salaries payable 4,500
Prepaid insurance 3,200 Notes payable 22,000
Building 75,000 Common stock 41,000
Retained earnings 10,800
In addition, the company reported the following cash flows.
Cash Inflows Cash Outflows
Customers $58,000 Employee salaries $20,000
Borrow from the bank (note) 22,000 Supplies 6,000
Sale of investments 11,000 Dividends 7,500
Purchase building 63,000
Required:
- Prepare a balance sheet.
- Prepare a statement of cash flows.
Exercise 1-12 (LO 1-3)
Requirement 1
| Squirrel Tree Services
Balance Sheet |
|||||
| Assets | Liabilities | ||||
| Cash | $ 7,700 | Accounts payable | $ 9,700 | ||
| Supplies | 1,800 | Salaries payable | 3,500 | ||
| Prepaid insurance | 3,500 | Notes payable | 20,000 | ||
| Building | 72,000 | Total liabilities | 33,200 | ||
| Stockholders’ Equity | |||||
| Common stock | 40,000 | ||||
| Retained earnings | 11,800 | ||||
| Total stockholders’ equity | 51,800 | ||||
| Total liabilities and stockholders’ equity | $85,000 | ||||
| Total assets | $85,000 | ||||
Requirement 2
| Squirrel Tree Services
Statement of Cash Flows |
||||
| Cash Flows from Operating Activities | ||||
| Cash inflows from customers | $ 60,000 | |||
| Cash outflows for salaries | (22,000) | |||
| Cash outflows for supplies | (4,000) | |||
| Net cash flows from operating activities | $34,000 | |||
| Cash Flows from Investing Activities | ||||
| Sale investments | 10,000 | |||
| Purchase building | (62,000) | |||
| Net cash flows from investing activities | (52,000) | |||
| Cash Flows from Financing Activities | ||||
| Borrow from bank | 20,000 | |||
| Pay dividends | (6,500) | |||
| Net cash flows from financing activities | 13,500 | |||
| Net increase in cash | (4,500) | |||
| Cash at the beginning of the year* | 12,200 | |||
| Cash at the end of the year | $ 7,700 | |||
