(SOLVED) Modern Automobiles of Denver Inc was formed

on January 1

Modern Automobiles of Denver, Inc., was formed on January 1, 2012. The following
transactions occurred during 2012:
On January 1, 2012, Modern issued its common stoc
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was-formed-on-january-1

Modern Automobiles of Denver, Inc., was formed on January 1, 2012. The following
transactions occurred during 2012:
On January 1, 2012, Modern issued its common stock for $280,000. Early in January, Modern
made the following cash payments:
a. $120,000 for equipment
b. $136,000 for inventory (four cars at $34,000 each)
c. $23,000 for 2012 rent on a store building

In February, Modern purchased nine cars for inventory on account. Cost of this inventory was
$414,000 ($46,000 each). Before year-end, Modern paid $124,200 of this debt. Modern uses
the FIFO method to account for inventory.
During 2012, Modern sold seven autos for a total of $490,000. Before year-end, Modern
collected 90% of this amount.
The business employs four people. The combined annual payroll is $100,000, of which Modern
owes $3,000 at year-end. At the end of the year, Modern paid income tax of $15,000.
Late in 2012, Modern declared and paid cash dividends of $16,000.
For equipment, Modern uses the straight-line depreciation method, over five years, with zero
residual value.

Requirements
1. Prepare Modern Automobiles of Denver, Inc.’s income statement for the year ended
December 31, 2012. Use the single-step format, with all revenues listed together and all
expenses together.
2. Prepare Modern’s balance sheet at December 31, 2012.
3. Prepare Modern’s statement of cash flows for the year ended December 31, 2012. Format
cash flows from operating activities by using the indirect method.

Modern Automobiles of Denver Inc was formed on January 1

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