# Question & Answer: Prepare a balance sheet and a statement of cash flows…..

Prepare a balance sheet and a statement of cash flows

The following transactions pertain to 2015, the first-year operations of Bailey Company. All inventory war stared and completed during 2015. Assume that all transactions are cash transactions. Acquired \$5,000 cash by issuing common stock. Paid \$710 for materials used to produce inventory. Paid \$1, 970 to production workers. Paid \$761 rental fee for production equipment. Paid \$90 to administrative employees. Paid \$110 rental fee for administrative office equipment. Produced 310 units of inventory of which 250 units were sold at a price of \$13 each.

SOLUTION:

Balance sheet:

 Inventory \$666 Common Stock 5000 Cash \$4,609 Retained Earning 275 \$5,275 5275

Cash : 5000+3250 – (710+ 1970+761+90+ 110)= 4609

Inventory: (310-250) * (710+1970+761)/310 = 666

 Cash Flow Statement Opening cash and cash equivalent \$0 Cash flow from operation Net Earning 275 Less: Increase in inventory (\$666) Net Cash flows from operations (\$391) Cash flow from financing Common stock \$5,000 Net cash flow from financing \$5,000 Cash flow from investing \$0 Closing Cash and cash equivalent \$4609