Klaben Motors, Inc., was formed on January 1, 2016. The following transactions occurred during 2016:
On January 1, 2016, Klaben issued its common stock for $510,000. Early in January, Klaben made the following cash payments:
a. $220,000 for equipment
b. $243,000 for inventory (nine cars at $27,000 each)
c. $25,000 for 2016 rent on a store building
In February, Klaben purchased three cars for inventory on account. Cost of this inventory was $ 117.000 ($39,000 each). Before year-end, Klaben paid $70,200 of this debt. The company uses the first-in, first-out (FIFO) method to account for inventory.
During 2016, Klaben sold 11 autos for a total of $649,000. Before year-end, it had collected 80% of this amount.
The business employs two people. The combined annual payroll is $151,000, of which Klaben owes $1,000 at year-end. At the end of the year, Klaben paid income tax of $22,000. Late in 2016, Klaben declared and paid cash dividends of $ 11,000.
For equipment, Klaben uses the straight-line depreciation method, over five years, with zero residual value.
Requirements
1. Prepare Klaben Motors, Inc.'s, income statement for the year ended December 31, 2016. Use the single-step format, with all revenues listed together and all expenses together.
2. Prepare Klaben's balance sheet at December 31, 2016.
3. Prepare Klaben's statement of cash flows for the year ended December 31, 2016. Format cash flows from operating activities by using the indirect method.