Use the Pruitt Motors, Inc., data from P12-67B.
In P12-67B.
Pruitt Motors, Inc., was formed on January 1, 2016. The following transactions occurred during 2016:
On January 1, 2016, Pruitt issued its common stock for $440,000. Early in January, Pruitt made the following cash payments:
a. $180,000 for equipment
b. $203,000 for inventory (seven cars at $29,000 each)
c. $17,000 for 2016 rent on a store building
In February, Pruitt purchased two cars for inventory on account. Cost of this inventory was $80,000 ($40,000 each). Before year-end, Pruitt paid $24,000 of this debt. The company uses the first-in, first-out (FIFO) method to account for inventory.
During 2016, Pruitt sold eight autos for a total of $488,000. Before year-end, it had collected 80% of this amount.
The business employs five people. The combined annual payroll is $125,000, of which Pruitt owes $3,000 at year-end. At the end of the year, Pruitt paid income tax of $12,600. Late in 2016, Pruitt declared and paid cash dividends of $19,000.
For equipment, Pruitt uses the straight-line depreciation method, over five years, with zero residual value.
Requirements
1. Prepare Pruitt'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 Pruitt's balance sheet at December 31, 2016.
3. Prepare Pruitt's statement of cash flows for the year ended December 31, 2016. Format cash flows from operating activities by using the direct method.