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 and comple uing 1. Acquired $5,000 cash by issuing common stock. 2. Paid $710 for materials used to produce inventory. 3. Paid $1,970 to production workers. 4. Paid $761 rental fee for production equipment. 5. Paid $90 to administrative employees. 6. Paid $110 rental fee for administrative office equipment. 7. Produced 310 units of inventory of which 250 units were sold at a price of $13 each.

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.

Expert Answer

 

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
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