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.
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 |