(Learning Objectives 2, 3, 4, 5: Preparing an income statement, balance sheet, and statement of cash fl ows—indirect method) Sweet Automobiles of Dubai, Inc., was formed on January 1, 20X6. The following transactions occurred during 20X6:

On January 1, 20X6, Sweet issued its shares for €350,000. Early in January, Sweet made the following cash payments:

a. €140,000 for equipment

b. €175,000 for inventory (fi ve cars at €35,000 each)

c. €19,000 for 20X6 rent on a store building In February, Sweet purchased six cars for inventory on account. Cost of this inventory was

€282,000 (€47,000 each). Before year-end, Sweet paid €197,400 of this debt. Sweet uses the FIFO method to account for inventory.

During 20X6, Sweet sold six vintage autos for a total of €426,000. Before year-end, Sweet collected 90% of this amount.

The business employs three people. The combined annual payroll is €90,000, of which Sweet owes €5,000 at year-end. At the end of the year, Sweet paid income tax of €14,000.

Late in 20X6, Sweet declared and paid cash dividends of €16,000.

For equipment, Sweet uses the straight-line depreciation method, over fi ve years, with zero residual value.

❙ Requirements 1. Prepare Sweet Automobiles of Dubai, Inc.’s income statement for the year ended December 31, 20X6.

2. Prepare Sweet’s balance sheet at December 31, 20X6.

3. Prepare Sweet’s statement of cash fl ows for the year ended December 31, 20X6. Format cash fl ows from operating activities by using the indirect method.