On January 1,2016, Retro issued its common stock for $575,000. Early in January,
ID: 2335318 • Letter: O
Question
On January 1,2016, Retro issued its common stock for $575,000. Early in January, Retro made the following cash payments:
a. $200,000 for equipment
b. $324,000 for inventory (nine cars at $36,000 each)
c. $24,000 for 2016 rent on a store building
In February, Retro purchased four cars for inventory on account. Cost of this inventory was $192,000 ($48,000 each). Before year-end, Retro
paid $115,200 of this debt. The company uses the first-in, first-out (FIFO) method to account for inventory. During 2016, Retro sold 10
autos for a total of $650,000.
Before year-end, it had collected 90% of this amount. The business employs
six people. The combined annual payroll is $150,000, of which Retro
owes $5,000 at year-end. At the end of the year, Retro
paid income tax of $13,000. Late in 2016, Retro declared and paid cash dividends of $14,000. For equipment, Retro uses the straight-line depreciation method, over five years, with zero residual value.
Requirement 1. Prepare
RetroRetro's
income statement for the year ended December 31,
20162016.
Use the single-step format, with all revenues listed together and all expenses together.
Retro Motors, Inc.
Income Statement
Year Ended December 31, 2016
Revenue:
Expenses:
Requirement 2. Prepare
RetroRetro's
balance sheet at December 31,
20162016.
Retro Motors, Inc.
Balance Sheet
December 31, 2016
Assets
Liabilities
Current assets:
Current liabilities:
Stockholders' equity
Property, plant, and equipment:
Less:
Requirement 3. Prepare
RetroRetro's
statement of cash flows for the year ended December 31,
20162016.
Format cash flows from operating activities by using the direct method. (Use parentheses or a minus sign for numbers to be subtracted and for a net decrease in cash. Enter "0" for zero balances.)
Retro Motors, Inc.
Statement of Cash Flows (Direct Method)
Year Ended December 31, 2016
Cash flows from operating activities:
Cash payments:
Total cash payments
Net cash provided by (used for) operating activities
Cash flows from investing activities:
Net cash provided by (used for) investing activities
Cash flows from financing activities:
Net cash provided by (used for) financing activities
Net increase (decrease) in cash
Choose from any list or enter any number in the input fields and then continue to the next question.
Retro Motors, Inc.
Income Statement
Year Ended December 31, 2016
Revenue:
Expenses:
Explanation / Answer
Retro Motors, Inc. Income Statement Year Ended December 31, 2016 Revenue: Sales 650000 Expenses: Cost of goods sold 372000 Salaries & Wages expense 150000 Rent expense 24000 Depreciation expense-Equipment 40000 Income tax expense 13000 599000 Net income 51000 Retro Motors, Inc. Balance Sheet December 31, 2016 Assets Liabilities Current assets: Current liabilities: Cash 324800 Accounts payable 76800 Accounts receivable 65000 Salries & Wages payable 5000 81800 Inventory 144000 533800 Stockholders' equity Property, plant, and equipment: Common stock 575000 Esuipment 200000 Retained earnings 37000 612000 Less: Depreciation 40000 160000 693800 693800 Retro Motors, Inc. Statement of Cash Flows (Direct Method) Year Ended December 31, 2016 Cash flows from operating activities: Cash from customers 585000 Cash payments: Cash paid for purchases -439200 Rent paid -24000 Salaries and wages paid -145000 Income tax paid -13000 Total cash payments -621200 Net cash provided by (used for) operating activities -36200 Cash flows from investing activities: Purchase of equipment -200000 Net cash provided by (used for) investing activities -200000 Cash flows from financing activities: Sale of common stock 575000 Cash dividends -14000 Net cash provided by (used for) financing activities 561000 Net increase (decrease) in cash 324800 Beginning balance of cash 0 Ending balance of cash 324800