Problem
Scott Corporation, a furniture store, was formed on January 1, 20x8, when Scott issued its no-par common stock for $300,000. Early in January, Scott made the following cash payments:
A. $150,000 for equipment
B. $120,000 for inventory (1,000 pieces of furniture)
C. $20,000 for 20x8 rent on a store building
In February, Scott purchased 2,000 units of furniture inventory on account from a Mexican company. Cost of this inventory was $260,000. Before year end, Scott paid $208,000 of this debt. Scott uses the FIFO method to account for inventory.
During 20x8 Scott sold 2,500 units of inventory for $200 each. Before year end, Scott collected 80% of this amount.
The store employs three people. The combined annual payroll is $95,000, of which Scott owes $4,000 at year end. At the end of the year, Scott paid income tax of $10,000.
Late in 20x8, Scott declared and paid cash dividends of $11,000.
For equipment, Scott uses the straight-line depreciation method, over 5 years, with zero residual value.
Required:
Q1. Prepare Scott Corporation's income statement for the year ended December 31, 20x8. Use the single-step format, with all revenues listed together and all expenses together.
Q2. Prepare Scott's balance sheet at December 31, 20x8.
Q3. Prepare Scott's statement of cash flows for the year ended December 31, 20x8. Format cash flows from operating activities by the indirect method.