The following transactions apply to Comfort Mattress Sales for 2011:
1. The business was started when the company received \(\$ 30,000\) from the issue of common stock.
2. Purchased mattress inventory of \(\$ 200,000\) on account.
3. Sold mattresses for \(\$ 300,000\) cash (not including sales tax). Sales tax of 8 percent is collected when the merchandise is sold. The merchandise had a cost of \(\$ 150,000\).
4. Provided a six-month warranty on the mattresses sold. Based on industry estimates, the warranty claims would amount to 2 percent of mattress sales.
5. Paid the sales tax to the state agency on \(\$ 250,000\) of the sales.
6. On September 1,2011 , borrowed \(\$ 30,000\) from the local bank. The note had a 6 percent interest rate and matured on March 1, 2012.
7. Paid \(\$ 4,600\) for warranty repairs during the year.
8. Paid operating expenses of \(\$ 96,000\) for the year.
9. Paid \(\$ 175,000\) of accounts payable.
10. Recorded accrued interest on the note issued in transaction no. 6 .
Required

a. Show the effect of these transactions on the financial statements using a horizontal statements model like the one shown here. Use a + to indicate increase, a - for decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is recorded as an example.

b. Prepare the journal entries for the above transactions and post them to the appropriate T-accounts.

c. Prepare the income statement, balance sheet, and statement of cash flows for 2011.

d. What is the total amount of current liabilities at December 31, 2011?

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Assets == Liabilities + Equity Rev. - Exp. = Net Inc. Cash Flow + NA + NA NA NA + FA