The following transactions apply to Comfort Mattress Sales for 2010

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Description

The following transactions apply to Comfort Mattress Sales for 2010.

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, 2010, borrowed $30,000 from the local bank. The note had a 6 percent interest rate and matured on March 1, 2011.
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.

Record accrued interest on the note issued in transaction no. 6.

Required:

(a) Record the above transactions in a horizontal statements model like the following one. (Leave no cells blank – be certain to enter “0” wherever required. Negative amounts should be indicated by a minus sign. Omit the “$” sign in your response.)

Comfort Mattress Sales
Accounting Equation
Assets = Liabilities + Equity
Event Cash + Inv. = Accts. Pay. + Sales Tax Pay. + Warr. Pay. + Int. Pay + Notes Pay. + Comm. Stock + Ret. Earn.
1
2
3a.
3b.
4
5
6
7
8
9

10

Bal.

+

=

+

+

+

+

+

+

(b)

Prepare the income statement, balance sheet, and statement of cash flows for 2010. (Leave no cells blank – be certain to enter ‘0″ wherever required. Negative amounts should be indicated by a minus sign. For Income Statement Except “interest expense” individual expenses should be entered as a positive value. Omit the “$” sign in your response.)

Comfort Mattress Sales
Income Statement
For the Year Ended December 31, 2010
(Click to select)Sales revenueOperating incomeOperating expensesGross marginInterest expense $
(Click to select)Gross marginCost of goods soldOperating incomeOperating expensesInterest expense
(Click to select)Operating incomeCost of goods soldSales revenueGross marginInterest expense
Expenses
(Click to select)Interest payableNotes payableWarranty expenseWarranties payableAccounts payableOperating expensesSales tax payable $
(Click to select)Accounts payableOperating expensesInterest payableNotes payableSales tax payableWarranties payableWarranty expense
Total Operating Expenses
(Click to select)Gross marginCost of goods soldOperating incomeInterest expenseSales revenue
(Click to select)Operating incomeSales revenueInterest expenseCost of goods soldGross margin
(Click to select)Net incomeNet loss

$

Comfort Mattress Sales
Balance Sheet
As of December 31, 2010
Assets
(Click to select)CashRetained earningsMerchandise inventoryCost of goods soldCommon stock $
(Click to select)CashCommon stockRetained earningsCost of goods soldMerchandise inventory
Total Assets

$

Liabilities
(Click to select)Operating expenseSales tax payableNotes payableWarranties payableInterest payableWarranty expenseAccounts payable $
(Click to select)Accounts payableOperating expenseSales tax payableInterest payableWarranty expenseNotes payableWarranties payable
(Click to select)Warranties payableSales tax payableOperating expenseAccounts payableNotes payableInterest payableWarranty expense
(Click to select)Interest payableOperating expenseAccounts payableNotes payableSales tax payableWarranty expenseWarranties payable
(Click to select)Warranties payableAccounts payableOperating expenseNotes payableInterest payableWarranty expenseSales tax payable
Total Liabilities
Stockholders’ Equity
(Click to select)CashMerchandise inventoryCommon stockRetained earningsCost of goods sold $
(Click to select)Common stockCost of goods soldMerchandise inventoryCashRetained earnings
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity

$

Comfort Mattress Sales
Statement of Cash Flows
For the Year Ended December 31, 2010
Cash Flows From Operating Activities:
(Click to select)Outflow for sales taxOutflow for expensesAccounts payableSales tax payableInflow from sales taxInflow from customersOutflow for inventory $
(Click to select)Sales tax payableOutflow for inventoryInflow from customersOutflow for expensesAccounts payableOutflow for sales taxInflow from sales tax
(Click to select)Accounts payableOutflow for sales taxInflow from customersInflow from sales taxOutflow for expensesOutflow for inventorySales tax payable
(Click to select)Outflow for sales taxSales tax payableInflow from sales taxOutflow for inventoryInflow from customersOutflow for expensesAccounts payable
(Click to select)Accounts payableInflow from sales taxOutflow for inventoryOutflow for expensesSales tax payableOutflow for sales taxInflow from customers
Net Cash Flow from Operating Activities $
Cash Flows From Investing Activities
Cash Flows From Financing Activities:
(Click to select)Outflow for inventoryInflow from stock issueOutflow for expensesOutflow for sales taxSales tax payableInflow from loanAccounts payable
(Click to select)Inflow from stock issueSales tax payableAccounts payableOutflow for sales taxOutflow for inventoryOutflow for expensesInflow from loan
Net Cash Flow from Financing Activities
Net Change in Cash
(Click to select)Plus: beginning cash balanceRetained earningsCost of goods soldMerchandise inventoryCommon stock
Ending Cash Balance

$

(c) What is the total amount of current liabilities at December 31, 2010? (Omit the “$” sign in your response.)

Total Current Liabilities

$

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