Classic Rare Coins (CRC) was formed on January 1, 2018. Additional data for the year follow:
a. On January 1, 2018, CRC issued no par common stock for $525,000.
b. Early in January, CRC made the following cash payments:
1. For store fixtures, $51,000
2. For merchandise inventory, $240,000
3. For rent expense on a store building, $18,000
c. Later in the year, CRC purchased merchandise inventory on account for $243,000.
Before year-end, CRC paid $153,000 of this accounts payable.
d. During 2018, CRC sold 2,800 units of merchandise inventory for $325 each.
Before year-end, the company collected 95% of this amount. Cost of goods sold for the year was $290,000, and ending merchandise inventory totaled $193,000.
e. The store employs three people. The combined annual payroll is $82,000, of which CRC still owes $5,000 at year-end.
f. At the end of the year, CRC paid income tax of $17,000. There was no income taxes payable.
g. Late in 2018, CRC paid cash dividends of $38,000.
h. For store fixtures, CRC uses the straight-line depreciation method, over five years, with zero residual value.
Requirements
1. What is the purpose of the statement of cash flows?
2. Prepare CRC's income statement for the year ended December 31, 2018. Use the single-step format, with all revenues listed together and all expenses listed together.
3. Prepare CRC's balance sheet at December 31, 2018.
4. Prepare CRC's statement of cash flows using the indirect method for the year ended December 31, 2018.