Prepare an income statement, balance sheet, and statement of cash flows-indirect method
Response to the following problem:
Lexington Luxury Automobiles, Inc., was formed on January 1, 2014. The following transactions occurred during 2014: On January 1, 2014, Lexington issued its common stock for $450,000. Early in January, Lexington made the following cash payments:
a. $175,000 for equipment
b. $234,000 for inventory (six cars at $39,000 each)
c. $16,000 for 2014 rent on a store building
In February, Lexington purchased four cars for inventory on account. Cost of this inventory was $188,000 ($47,000 each). Before year-end, Lexington paid $75,300 of this debt. Lexington uses the FIFO method to account for inventory. During 2014, Lexington sold seven vintage autos for a total of $490,000. Before year-end, Lexington collected 50% of this amount. The business employs two people. The combined annual payroll is $78,000, of which Lexington owes $8,000 at year-end. At the end of the year, Lexington paid income tax of $19,500. Late in 2014, Lexington declared and paid cash dividends of $22,000. For equipment, Lexington uses the straight-line depreciation method, over five years, with zero residual value.