The Warm as Toast Company installs furnaces and fireplaces in homes and businesses. Each furnace and fireplace carries a four-year warranty. During 2011, the company had sales of $835,000. Customers paid half of the sales price when they arranged for an installation and the other half when the furnace or fireplace was installed. At year end, $76,000 of the sales amount represented amounts paid for furnaces or fireplaces that were not yet installed and for which the second half of the payment had not yet been received. The cost associated with the sales was $407,000 for the furnaces and fireplaces that had been installed that year. An additional cost of $198,000 was incurred for the labour associated with the installation. The accountant estimated that total future warranty costs associated with the installed items would likely be $46,000 over the next five years.
Required:
Prepare as much of the income statement for The Warm as Toast Company for 2011 as you can, showing the proper amount of sales, cost of goods sold, gross profit, and any other amounts that can be included. Show all calculations. What other expenses do you think the company would probably have?