Question 4 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: 1. $150,000 for equipment 2, $120,000 for inventory (four cars at $30,000 each) 3. $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 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 ve years with zero residual value