Vintage Automobiles of Orangeville Ltd. was formed on January 1, 2014, when Vintage issued common shares for $300,000. Early in January 2014, Vintage made the following cash payments:
a. $150,000 for equipment
b. $120,000 for inventory (four cars at $30,000 each)
c. $20,000 for 2014 rent on a store building
In February 2014, Vintage purchased six cars for inventory on account. Cost of this inventory was $260,000 ($43,333.33 each). Before year-end, Vintage paid $208,000 of this debt. Vintage uses the FIFO method to account for inventory.
During 2014, Vintage sold eight vintage autos for a total of $500,000. Before year-end, Vintage collected 80% of this amount.
The business employs three people. The combined annual payroll is $95,000, of which Vintage owes $4,000 at year-end. At the end of the year, Vintage paid income tax of $10,000.
Late in 2014, Vintage declared and paid cash dividends of $11,000.
For equipment, Vintage uses the straight-line depreciation method over five years with zero residual value.
Requirements
1. Prepare Vintage Automobiles of Orangeville Ltd.'s income statement for the year ended December 31, 2014. Use the single-step format, with all revenues listed together and all expenses listed together.
2. Prepare Vintage's balance sheet at December 31, 2014.
3. Prepare Vintage's statement of cash flows for the year ended December 31, 2014. Format cash flows from operating activities by using the indirect method.
4. Comment on the business performance based on the statement of cash flows.