Question

Squirrel tree services reports the following amounts on december 31, 2021.Assets Liabilities and Stockholders’ EquityCash $9,500 Accounts payable $15,100Supplies 3,600 Salaries payable 5,300Prepaid insurance 5,300 Notes payable 38,000Building 90,000 Common stock 40,000 Retained earnings 10,000In addition, the company reported the following cash flows.Cash Inflows Cash OutflowsCustomers $96,000 Employee salaries $40,000Borrow from the bank (note) 38,000 Supplies 22,000Sale of investments 35,800 Dividends 15,500 Purchase building 98,000Required:

1. Prepare a balance sheet.
2. Prepare a statement of cash flows.

Answer 1

Answer and Explanation:

1. The preparation of the balance sheet is presented below:

Squirrel tree services

Balance sheet

For the year ended December, 31, 2021

Liabilities Amount Assets Amount

and stockholder equity

Liabilities

Account payable $15,100 Cash $9,500

Salaries payable $5,300 Supplies $3,600

Note payable $38,000 Prepaid insurance $5,300

Total liabilities $58,400 Building $90,000

Equity

Common stock $40,000

Retained earnings $10,000

Total equity $50,000

Total liabilities & equity $108,400 Total assets $108,400

2. The preparation of the cash flow statement is presented below:

Squirrel tree services

Cash flow statement

For the year ended December, 31, 2021

Particulars Amount ($) Amount ($)

Cash flow from operating activities-

Cash inflows customers 96,000

Cash outflows salaries (40,000)

Cash outflows supplies (22,000)

Net Cash flow from operating activities (A) 34,000

Cash flow from investing activities-

Sale of investments 35,800

Purchase of building (98,000)

Net Cash flow from investing activities (B) (62,200)

Cash flow from financing activities

Borrowed from bank 38,000

Dividends (15,500)

Net Cash flow from financing activities (C) 22,500

Net increase in cash (A+B+C) (5,700)

Add: Cash at beginning of year 15,200

Cash at end of year 9,500