Example 2

Mickeys Cookies Company

(Complete Cost Flows)

You have been provided with all the necessary information (along with all the cookies you can eat) and asked to calculate a complete set of financial statements for the year ending December 31, 2014.

Beginning cash balance $ 42,500

Beginning accounts receivable balance (net) 71,900

Ending accounts receivable balance (net) 80,000

Beginning plant assets balance 724,000

Beginning accumulated depreciation balance 278,400

Beginning notes payable balance 100,000

Beginning income taxes payable balance 5,000

Ending income taxes payable balance 6,000

Beginning common stock balance 269,600

Beginning retained earnings balance 205,100

Beginning accounts payable balance 40,000

Ending accounts payable balance 35,000

Beginning raw materials inventory $ 16,700

Ending raw materials inventory 22,800

Beginning work-in-process inventory 18,400

Ending work-in-process inventory 25,200

Beginning finished goods inventory 24,600

Ending finished goods inventory 19,500

Direct material purchased 152,500

Direct labor 175,600

Indirect labor used in production 14,300

Factory repairs 12,600

Factory utilities 10,100

Factory depreciation 9,440

Factory insurance 8,360

Sales $ 680,000

Selling expenses 114,900

Administrative expenses 92,600

Interest expense 5,150

Income tax expense 20,000

Mickeys has a few odd habits. Such as, always paying for product costs with cash, while paying for period costs on account. The exception is that interest expense must be paid to the bank as cash. Additionally, all sales are made on account.

Required:

Calculate Net Income and the ending balance in the Cash account, and prepare a rough-draft of the Balance Sheet and income statement.