The following transactions pertain to 2015, the first-year operations of Bailey

Question

The following transactions pertain to 2015, the first-year operations of Bailey Company. All inventory was started and completed during 2015. Assume that all transactions are cash transactions.

Prepare statement of cash flows.

(I'm having trouble finding the outflow of inventory amount for the statement of cash flows

1. Acquired $7,000 cash by issuing common stock. 2. Paid $2,800 for materials used to produce inventory. 3. Paid $1,900 to production workers. 4. Paid $1,300 rental fee for production equipment. 5. Paid $350 to administrative employees. 6. Paid $400 rental fee for administrative office equipment. 7. Produced 500 units of inventory of which 450 units were sold at a price of $17.50 each.

Explanation / Answer

Solution:- Bailey Company statement of cash flow for the year 2015 Particulars Amount ($) Amount($) Cash Flow from Operating Activities Inflow from revenue (450*17.50) 7875 Less:- Outflow for Inventory 5400 Administrative Expenses( 350+400) 750 Increase in inventory 600 6750 Net inflow from operating activities 1125 Cash Flow from operating activities 0 Cash flow from investing activities Issue of common stock 7000 Net cash flow from investing activities 7000 Net increase /(decrease )in cash 8125 Beginning cash balance 0 Ending cash balance 8125 Working note:- calculation of inventory cost (cost of goods sold) Particulars Amount Material cost 2800 Production workers 1900 Rental fee for production equipment 1300 Total cost of production 6000 Number of units produced 500 Number of units sold 450 Cost of goods sold (6000*450/500) 5400 Cost of finished goods inventory (6000*50/500) 600 Note:- Outflow for inventory = cost of goods sold= 5400 Please feel free to ask if you have any query in the comment section.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.