Exercise 1-12 (LO 1-3)
Requirement 1
Squirrel Tree Services
Balance Sheet
Assets Liabilities
Cash $ 8,700 Accounts payable $ 9,600
Supplies 1,700 Salaries payable 4,500
Prepaid insurance 3,200 Notes payable 22,700
Building 75,000 Total liabilities 36,800
Stockholders’ Equity
Common stock 41,000
Retained earnings 10,800
Requirement 2
Squirrel Tree Services
Statement of Cash Flows
Cash Flows from Operating Activities
Cash inflows from customers $ 58,000
Cash Flows from Investing Activities
Sale investments 11,000
Cash Flows from Financing Activities
Borrow from bank 22,000
Pay dividends (7,500)
Net cash flows from financing activities 14,500
Net increase in cash (5,500)
* Plug number in order to calculate correct ending balance
Exercise 1-13
1. Revenues − Expenses = Net Income
2.
Change in
stockholders’
equity
=Issue common
stock +Net
Income − Dividends
$20,400 = $12,000 + $14,300 − $X
3. Assets = Liabilities + Stockholders’
equity
$27,200 = $X + $15,200
4. Total change
in cash =Operating
cash flows +Investing
cash flows +Financing
cash flows
$11,000 = $25,000 + ($22,000) + $X
Exercise 1-14
Year
Net
Income Dividends
Retained
Earnings*
1 $2,100 $ 700 $ 1,400
2 2,800 1,000 3,200
* Retained earnings = beginning retained earnings + net income − dividends
Exercise 1-15
($ in billions)
Change in
retained
earnings
= Net Income − Dividends
1.
Change in
retained
earnings
= Net Income − Dividends
2.
Change in
retained
earnings
= Net Income − Dividends
3.
Change in
retained
earnings
= Net Income − Dividends
4.
Change in
retained
earnings
= Net
Income
− Dividends
[$X − (−$2.1)] = −$1.0 − $0
5.
Change in
retained
earnings
= Net
Income
− Dividends
[$1.6 − $X] = $0.5 − $0.1
Exercise 1-16
($ in billions)
Assets = Liabilities + Stockholders
’ equity
1. Assets = Liabilities + Stockholders’
equity
2. Assets = Liabilities + Stockholders’
equity
$X = $1,200 + $1,500
3. Assets = Liabilities + Stockholders’
equity
$9.9 = $X + $5.4
4. Change in
Assets =Change in
liabilities +
Change in
stockholders’
equity
$12.3 = $4.8 + $X
5. Change in
Assets =Change in
liabilities +
Change in
stockholders’
equity
$X = ($0.95) + $0.32
Exercise 1-17
($ in billions)
Total change
in cash =Operating
cash flows +Investing
cash flows +Financing
cash flows
1. Total change
in cash =Operating
cash flows +Investing
cash flows +Financing
cash flows
2. Total change
in cash =Operating
cash flows +Investing
cash flows +Financing
cash flows
3. Total change
in cash =Operating
cash flows +Investing
cash flows +Financing
cash flows
4. Total change
in cash =Operating
cash flows +Investing
cash flows +Financing
cash flows
5. Total change
in cash =Operating
cash flows +Investing
cash flows +Financing
cash flows
Exercise 1-18 (LO 1-5)
1. d.
2. e.
3. a.
4. c.
5. f.
6. b.
7. g.
Exercise 1-19
1. g. Comparability
2. f. Free from material error
3. b. Predictive value
4. i. Timeliness
5. a. Confirmatory value
6. e. Neutrality
7. d. Completeness
8. h. Verifiability
9. j. Understandability
10. c. Materiality
Exercise 1-20
1. b.
2. c.
3. d.
4. a.