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 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. Required a-1. Prepare an income statement. BAILEY COMPANY Income Statement for 2015

Explanation / Answer

a-1) Bailey Company

Income Statement for 2015 (Amount in $)

WN 1) Calculation of value of closing inventory (Amount in $)

a-2)   Bailey Company

Balance Sheet as of December 31,2015 (Amount in $)

a-3)   Bailey Company

Statement of Cash Flows for the year ended December 31,2015 (Amount in $)

Sales (450 units*$17.50) 7,875 Less: Cost of goods sold Material used (2,800) Paid to workers (1,900) Rental fee for production equipment (1,300) Change in Inventory (0-6,000) (WN 1) 600 Paid to Administrative employee (350) Rental fee for Administrative office equipment (400) Net Income transferred to retained earnings 1,725

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