Classic Automobiles of Huntsville Ltd. was formed on January 1,2016 when Classic issued common shares for $300,000. Early inJanuary 2016, Classic made the following cash payments:

• $150,000 for equipment
• $120,000 for inventory (four cars at $30,000 each)
• $20,000 for 2016 rent on a store building
  

In February 2016, Classic purchased six cars for inventory onaccount. Cost of this inventory was $260,000 ($43,333.33 each).Before year-end, Classic paid $208,000 of this debt. Classic usesthe FIFO method to account for inventory.

During 2016, Classic sold eight vintage autos for a total of$500,000. Before year-end, Classic collected 80% of thisamount.

The business employs three people. The combined annual payrollis $95,000, of which Classic owes $4,000 at year end. At the end ofthe year, Classic paid income tax of $10,000.

Late in 2016, Classic declared and paid cash dividends of$11,000.

For equipment, Classic uses the straight-line depreciationmethod over five years with zero residual value.

1. Prepare Classic Automobiles of Huntsville Ltd.’s incomestatement for the year ended December 31, 2016. Use the single-stepformat, with all revenues listed together and all expenses listedtogether.
2. Prepare Classic’s balance sheet at December 31, 2016.
3. Prepare Classic’s statement of cash flows for the year endedDecember 31, 2016. Format cash flows from operating activities byusing the indirect method.
4. Comment on the business performance based on the statement ofcash flows.