Frank Rare Coins (FRC) was formed on January 1, 2016. Additional data for the year follow:
a. On January 1, 2016, FRC issued no par common stock for $450,000.
b. Early in January, FRC made the following cash payments:
1. For store fixtures, $48,000
2. For merchandise inventory, $260,000
3. For rent expense on a store building, $14,000
c. Later in the year, FRC purchased merchandise inventory on account for $237,000.
Before year-end, FRC paid $137,000 of this accounts payable.
d. During 2016, FRC sold 2,500 units of merchandise inventory for $400 each.
Before year-end, the company collected 90% of this amount. Cost of goods sold for the year was $340,000, and ending merchandise inventory totaled $157,000.
e. The store employs three people. The combined annual payroll is $92,000, of which FRC still owes $2,000 at year-end.
f. At the end of the year, FRC paid income tax of $23,000. There was no income taxes payable.
g. Late in 2016, FRC paid cash dividends of $35,000.
h. For store fixtures, FRC uses the straight-line depreciation method, over five years, with zero residual value.
1. What is the purpose of the statement of cash flows?
2. Prepare FRC’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.
3. Prepare FRC’s balance sheet at December 31, 2016.
4. Prepare FRC’s statement of cash flows using the indirect method for the year ended December 31, 2016.