Question

Squirrel Tree Services reports the following amounts on December 31.

Answer 1

Answer and Explanation:

The Preparation of balance sheet is prepared below:-

                                    Squirrel Tree Services

                                        Balance Sheet

                              For the year ended 31st December

Assets                        Amount              Liabilities                 Amount

Cash                             $8,300            Accounts payable    $11,500

Supplies                       $2,400            Salary payable         $4,100

Prepaid insurance       $4,100            Notes payable          $26,000

Building                        $78,000

                                                            Total liabilities         $41,600

                                                            Common stock        $40,000

                                                            Retained earning    $11,200

                                                            Total stockholder

                                                                 equity                  $51,200

                                                            Total liabilities and

Total assets              $92,800          stockholder equity   $92,800

B. The preparation of cash flows is shown below:-

                                    Squirrel Tree Services

                                        Cash flow

                              For the year ended 31st December

Particulars                                                                         Amount

Cash flow from operating activities

Cash inflow from customers                   $96,000

Cash outflow for salaries                         ($40,000)

Cash outflow for supplies                        ($22,000)

Net cash flow from operating activities                         $34,000

Cash flow from investing activities

Sale of investment                                  $35,800

Purchase of building                               ($98,000)

Net cash flow from investing activities                         ($62,200)

Cash flow from financing activities

Borrow from bank                                  $38,000

Dividends                                                ($15,500)

Net cash flow financing activities                                  $22,500

Net increase in cash                                                       ($5,700)

Beginning cash of the year                                            $15,200

Ending cash of the year                                                 $9,500

Working note

we deduct the cash inflow from cash outflow and add cash to reach the beginning cash of the year.