. . . Classic Automobiles of Huntsville Ltd. was formed on January 1, 2016, when Classic issued common shares for $300,000. Early in January 2016, Classic made the following cash payments: $150,000 for equipment $120,000 for inventory (four cars at $30,000 each) $20,000 for 2016 rent on a store building In February 2016, Classic purchased six cars for inventory on account. Cost of this inventory was $260,000 ($43,333.33 each). Before year-end, Classic paid $208,000 of this debt. Classic uses the FIFO method to account for inventory. During 2016, Classic sold eight vintage autos for a total of $500,000. Before year-end, Classic collected 80% of this amount. The business employs three people. The combined annual payroll is $95,000, of which Classic owes $4,000 at year-end. At the end of the year, Classic paid an income tax of $10,000. Late in 2016, Classic declared and paid cash dividends of $11,000. For equipment, Classic uses the straight-line depreciation method over five years with zero residual value. 1. Prepare Classic Automobiles of Huntsville Ltd.'s income statement for the year ended December 31, 2016. Use the single-step format with all revenues listed together and all expenses listed together. 2. Prepare Classic's balance sheet on December 31, 2016. 3. Prepare Classic's statement of cash flows for the year ended December 31, 2016. Format cash flows from operating activities by using the indirect method. 4. Comment on the business performance based on the statement of cash flows. Unit 10 Exercise