Question

Speedy Motors, Inc., was formed on January 1, 2016. January: 1 Issued common stock: $440,000 Paid in cash: a. $180,000 for equipment b. $203,000 for inventory (7 cars @ $29,000 each) c. $17,000 for 2016 rent on store building February: Beginning of month: Purchase: 2 cars for inventory on account ($80,000 and $40,000). Sold 8 cars for total of $ $488,000. End of month: Paid $24,000 for inventory on account for purchase on cars. December: Collected & paid 70% ($ 64,000) of the $488,000 from sale of the 8 cars sold. Annual Wages/salary paid: $125,000. Salary owed: $ 7,000 @ 5 employees= 5 x $7,000 Income tax paid: $12,600 Declared & paid cash dividends: $18,000 Use straight-line depreciation method, over 5 years, with zero residual value. Requirement 1. Prepare Speedy's income statement for the year ended December 31, 2016. Use the single-step format, with all revenues listed together and all expenses together.

Answer 1

Income Statement (for the year ending Dec31 2016)
Revenue:
Sales (8 cars )				488000
Less: Expense
Cost of Goods sold (7*29000+80000)				283000
Rent expense				17000
Annual wages and salaries			125000
Add: due but not paid			35000	160000
Income tax expense				12600
Net income after tax				15400