PREPARE AN INCOME STATEMENT, PREPARE A BALANCE SHEET AND PREPARE A STATEMENT OF

Question

PREPARE AN INCOME STATEMENT, PREPARE A BALANCE SHEET AND PREPARE A STATEMENT OF CASH FLOWS

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 transaction:s 1. Acquired $4,800 cash by issuing common stock. 2. Paid $720 for materials used to produce inventory. 3. Paid $1,930 to production workers. 4. Paid $870 rental fee for production equipment. 5. Paid $100 to administrative employees. 6. Paid $111 rental fee for administrative office equipment. 7. Produced 320 units of inventory of which 250 units were sold at a price of $13 each.

Explanation / Answer

INCOME STATEMENT

Cost of goods sold was calculated as under

BALANCE SHEET

Cash balance had been computed as ......

4800 (received on selling common stock) + 3250 ( cash sales) - 3731 ( all expenses) = 4319

STATEMENT OF CASH FLOW

Sales ( 250 * 13) 3250 (-) Cost of goods sold 2750 Gross profit 500 (-) Administrative exp 100 (-) Renta fee Office equip 111 Net income 289

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