Problem 10-21 Product versus selling, general, and administrative costs LO 10-2

Question

Problem 10-21 Product versus selling, general, and administrative costs LO 10-2 The following transactions pertain to 2015, the first-year operations of Bailey Company. ll 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 S350 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 eaclh a-3. Prepare statement of cash flows. (Amounts to be deducted should be indicated with a minus sign.) Answer is complete but not entirely correct. BAILEY COMPANY Statements of Cash Flows For the Year Ended December 31 Cash flows from operating activities Inflow from revenue Outflow for inventory Outflow for administrative expenses $ 7,875 9,900 (750) Net outflow from operating activities Cash flows from investing activities Cash flows from financing activities Net change in cash Plus: Beginning cash balance Ending cash balance 17,025 7,000 6,780 30,805 8,790 $ 39,595

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BALEY COMPANY Statement of cash flow For the year ended december 31 Cash flow from operating activities: Inflow from revenue 7,875 450 * 17.50 Outflow for inventory (6,000) 2,800 + 1,900 + 1,300 Outflow for administrative expense (750) 350 + 400 Net outflow from operating activity 1,125 Cash flow from investing activity 0 Cash flow from financing activity Proceeds from issuance of common stock 7,000 Net cash used in financing activities 7,000 Net chage in cash 8,125 + beginning balance of cash 0 Ending cash balance 8,125

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