Question

P11-57A (similar to) Question Help Retro Motors, Inc., was formed on January 1, 2018. The following transactions occurred during 2018: (Click the icon to view the transactions.) Read the requirements. Requirement 1. Prepare Retro's income statement for the year ended December 31, 2018. Use the single-step format, with all revenues listed together and all expenses together. Retro Motors, Inc. Income Statement Year Ended December 31, 2018 More Info Revenue: Expenses: On January 1, 2018, Retro issued its common stock for $430,000. Early in January, Retro made the following cash payments: a. $160,000 for equipment b. $234,000 for inventory (six cars at $39,000 each) c. $18,000 for 2018 rent on a store building In February, Retro purchased four cars for inventory on account. The cost of this inventory was $192,000 ($48,000 per car). Before year-end, the company paid off $115,200 of this debt. The company uses the first-in, first-out (FIFO) method to account for its inventory. During 2018, Retro sold seven autos for a total of $504,000. Before year-end, it had collected 90% of this amount. The business employs two people. The combined annual payroll is $60,000, of which Retro owes $1,000 at year-end. At the end of the year, the company paid income taxes of $22,000. Late in 2018, Retro declared and paid cash dividends of $19,000. For equipment, Retro uses the straight-line depreciation method, over five years, with zero residual value. Print Done Choose from any list or enter any number in the input fields and then click Check Answer.

Answer 1

Income statement is one of the most important part of financial statements.

Income statement records all the incomes and expenses to find out Net income/loss.

Income statement for Retro inc.

Revenues:
Sales Revenue	$504,000	Note 1
Expenses:
Cost of Goods sold	$282,000	Note 2
Salary expenses	$60,000	As given for 2 people
Income tax expenses	$22,000	As given in question
Depreciation expense	$32,000	Note 3
Rent expense	$18,000	As given in question point C
Net Income (loss)	$90,000	[504,000-282,000-60,000-22,000-32,000-18,000]

Notes:

(1) Sales = $504,000 (7 Autos)

(2) Cost of goods sold FIFO = 7 Autos of which 6 is beginning inventory and 1 will be sild from auto purchased in february.

=$234,000+$48,000

=$282,000

(3) depreciation = equipment -salvage/useful life

=$160,000-$0/5

=$32,000