The Balance Sheet (including notes) presented below has been submitted to you by an inexperienced bookkeeper. Prepare a corrected balance sheet (including notes). Consider formatting, terminology deficiencies, and classification inaccuracies in your corrections. $ 432,000 495,000 146,000 Tree Industries, Inc. Balance Sheet For the Period Ended 12/31/21 Assets Fixed Assets-Tangible Equipment $110,000 Less: reserve for depreciation 440,000 $ 70,000 Factory supplies 22,000 Land and buildings 400,000 Less: reserve for depreciation (150,000) 250,000 Plant site held for future use 90,000 Current Assets Accounts receivable 175.000 Cash 80,000 Inventory 220,000 Treasury stock (at cost) 20,000 Fixed Assets--Intangible Goodwill 80,000 Notes receivable 40,000 Patents 26.000 Deferred Charges Advances to salespersons 60,000 Prepaid rent 27,000 Returnable containers 75,000 TOTAL ASSETS Liabilities Current Liabilities Accounts payable $140,000 Allowance for doubtful accounts 8,000 Common stock dividend distributable 35,000 Income tax payable 42,000 Sales tax payable 17,000 Long-term Liabilities, 5% debenture bonds, due 2024 500,000 Reserve for contingencies 150,000 TOTAL LIABILITIES Equity Capital stock, $10 par value, issued 12,000 shares with 60 shares held as treasury stock $150,000 Capital surplus 90,000 Dividends paid (20,000) Earned surplus 123,000 TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 162,000 $1.235.000 $ 242,000 650,000 892,000 343,000 $1.235.000 Note 1. The reserve for contingencies has been created by charges to earned surplus and has been established to provide a cushion for future uncertainties. Note 2. The inventory account includes only items physically present at the main plant and warehouse. Items located at the company's branch sales office amounting to $40,000 are excluded since the company has consistently followed this procedure for many years. You have been asked to settle an argument between a client and his inexperienced bookkeeper. Presented below is a Statement of Cash Flows prepared by the bookkeeper. Crazxwild Apparel Statement of Cash Flows January 31, 2021 Sources of cash From sales of merchandise From sale of common stock From sale of investment From depreciation From issuance of note for truck From interest on investments Total Sources of cash $382,000 380,000 120,000 80,000 30,000 8,000 1,000,000 Uses of cash For purchase of fixtures and equipment For merchandise purchased for resale For operating expenses (including depreciation) For purchase of investment For purchase of truck by issuance of note For purchase of treasury stock For interest on note Total uses of cash 330,000 253,000 170,000 95,000 30,000 10,000 3,000 891,000 Net increase in cash $109,000 The bookkeeper claims this statement is an excellent portrayal of a great first year with an increase in cash of $109,000. Your client claims that the first year of operations was an operating failure and the $109,000 is not the increase in cash. Using the statement above, prepare a statement of cash flows in proper form using the indirect method. The only noncash items in income are depreciation and the gain from the sale of the investment (the purchase and the sale are related). With whom do you agree, your client or the bookkeeper? Explain your position. The Balance Sheet (including notes) presented below has been submitted to you by an inexperienced bookkeeper. Prepare a corrected balance sheet (including notes). Consider formatting, terminology deficiencies, and classification inaccuracies in your corrections. $ 432,000 495,000 146,000 Tree Industries, Inc. Balance Sheet For the Period Ended 12/31/21 Assets Fixed Assets-Tangible Equipment $110,000 Less: reserve for depreciation 440,000 $ 70,000 Factory supplies 22,000 Land and buildings 400,000 Less: reserve for depreciation (150,000) 250,000 Plant site held for future use 90,000 Current Assets Accounts receivable 175.000 Cash 80,000 Inventory 220,000 Treasury stock (at cost) 20,000 Fixed Assets--Intangible Goodwill 80,000 Notes receivable 40,000 Patents 26.000 Deferred Charges Advances to salespersons 60,000 Prepaid rent 27,000 Returnable containers 75,000 TOTAL ASSETS Liabilities Current Liabilities Accounts payable $140,000 Allowance for doubtful accounts 8,000 Common stock dividend distributable 35,000 Income tax payable 42,000 Sales tax payable 17,000 Long-term Liabilities, 5% debenture bonds, due 2024 500,000 Reserve for contingencies 150,000 TOTAL LIABILITIES Equity Capital stock, $10 par value, issued 12,000 shares with 60 shares held as treasury stock $150,000 Capital surplus 90,000 Dividends paid (20,000) Earned surplus 123,000 TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 162,000 $1.235.000 $ 242,000 650,000 892,000 343,000 $1.235.000 Note 1. The reserve for contingencies has been created by charges to earned surplus and has been established to provide a cushion for future uncertainties. Note 2. The inventory account includes only items physically present at the main plant and warehouse. Items located at the company's branch sales office amounting to $40,000 are excluded since the company has consistently followed this procedure for many years. You have been asked to settle an argument between a client and his inexperienced bookkeeper. Presented below is a Statement of Cash Flows prepared by the bookkeeper. Crazxwild Apparel Statement of Cash Flows January 31, 2021 Sources of cash From sales of merchandise From sale of common stock From sale of investment From depreciation From issuance of note for truck From interest on investments Total Sources of cash $382,000 380,000 120,000 80,000 30,000 8,000 1,000,000 Uses of cash For purchase of fixtures and equipment For merchandise purchased for resale For operating expenses (including depreciation) For purchase of investment For purchase of truck by issuance of note For purchase of treasury stock For interest on note Total uses of cash 330,000 253,000 170,000 95,000 30,000 10,000 3,000 891,000 Net increase in cash $109,000 The bookkeeper claims this statement is an excellent portrayal of a great first year with an increase in cash of $109,000. Your client claims that the first year of operations was an operating failure and the $109,000 is not the increase in cash. Using the statement above, prepare a statement of cash flows in proper form using the indirect method. The only noncash items in income are depreciation and the gain from the sale of the investment (the purchase and the sale are related). With whom do you agree, your client or the bookkeeper? Explain your position