Mazzel Company began operations on January 1, 2008, by issuing common stock for $33,000 cash. During 2008, Mazzel received $39,000 cash from revenue and incurred costs that required $66,000 of cash payments.
Required:
Prepare an income statement, balance sheet, and statement of cash flows for Mazzel for 2008, under each of the following independent scenarios.
a. Mazzel is a promoter of rock concerts. The $66,000 was paid to provide a rock concert that produced the revenue.
b. Mazzel is in the car rental business. The $66,000 was paid to purchase automobiles. The automobiles were purchased on January 1, 2008, had four-year useful lives and no expected salvage value. Mazzel uses straight-line depreciation. The revenue was generated by leasing the automobiles.
c. Mazzel is a manufacturing company. The $66,000 was paid to purchase the following items.
d. Refer to Requirement C. Could Mazzel determine the actual cost of making the 500th units of product? How likely is it that the actual costs of the 500th unit of product was exactly the same cost as the cost of producing the 501st units of product? Explain why management would be more interested in average cost than in actual cost.