Classic Automobiles of Cedar Grove, Inc., was formed on January 1, 2012. The following transactions occurred during 2012: On January 1, 2012, Classic issued its common stock for $430,000. Early in January, Classic made the following cash payments: a. $160,000 for equipment b. $234,000 for inventory (six cars at $39,000 each) c. $18,000 for 2012 rent on a store building In February, Classic purchased four cars for inventory on account. Cost of this inventory was $192,000 ($48,000 each). Before year-end, Classic paid $76,800 of this debt. Classic uses the FIFO method to account for inventory. During 2012, Classic sold seven vintage autos for a total of $504,000. Before year-end, Classic collected 50% of this amount. The business employs two people. The combined annual payroll is $60,000, of which Classic owes $9,000 at year-end. At the end of the year, Classic paid income tax of $22,000. Late in 2012, Classic declared and paid cash dividends of $18,000. For equipment, Classic uses the straight-line depreciation method, over five years, with zero residual value. Required: a) Prepare Cash flow statement using indirect
Classic Automobiles of Cedar Grove, Inc., was formed on January 1, 2012. The following transactions occurred during 2012: On January 1, 2012, Classic issued its common stock for $430,000. Early in January, Classic made the following cash payments: a. $160,000 for equipment b. $234,000 for inventory (six cars at $39,000 each) c. $18,000 for 2012 rent on a store building In February, Classic purchased four cars for inventory on account. Cost of this inventory was $192,000 ($48,000 each). Before year-end, Classic paid $76,800 of this debt. Classic uses the FIFO method to account for inventory. During 2012, Classic sold seven vintage autos for a total of $504,000. Before year-end, Classic collected 50% of this amount. The business employs two people. The combined annual payroll is $60,000, of which Classic owes $9,000 at year-end. At the end of the year, Classic paid income tax of $22,000. Late in 2012, Classic declared and paid cash dividends of $18,000. For equipment, Classic uses the straight-line depreciation method, over five years, with zero residual value. Required: a) Prepare Cash flow statement using indirect
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Classic Automobiles of Cedar Grove, Inc., was formed
on January 1, 2012. The following transactions
occurred during 2012:
On January 1, 2012, Classic issued its common stock
for $430,000. Early in January, Classic made the
following cash payments:
a. $160,000 for equipment
b. $234,000 for inventory (six cars at $39,000 each)
c. $18,000 for 2012 rent on a store building
In February, Classic purchased four cars for inventory
on account. Cost of this inventory was $192,000
($48,000 each). Before year-end, Classic paid $76,800
of this debt. Classic uses the FIFO method to account
for inventory.
During 2012, Classic sold seven vintage autos for a
total of $504,000. Before year-end, Classic collected
50% of this amount. The business employs two people.
The combined annual payroll is $60,000, of which
Classic
owes $9,000 at year-end. At the end of the year, Classic
paid income tax of $22,000. Late in 2012, Classic
declared and paid cash dividends of $18,000. For
equipment, Classic uses the straight-line depreciation
method, over five years, with zero residual value.
Required:
a) Prepare Cash flow statement using indirect
method
b) Journalize the transactions
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