The following transactions apply to Toro Co. for 2011:

1. Received \(\$ 50,000\) cash from the issue of common stock.

2. Purchased inventory on account for \(\$ 230,000\).

3. Sold inventory for \(\$ 245,000\) cash that had cost \(\$ 130,000\). Sales tax was collected at the rate of 5 percent on the inventory sold.

4. Borrowed \(\$ 30,000\) from the First State Bank on March 1, 2011. The note had a 7 percent interest rate and a one-year term to maturity.

5. Paid the accounts payable (see transaction 2 ).

6. Paid the sales tax due on \(\$ 180,000\) of sales. Sales tax on the other \(\$ 65,000\) is not due until after the end of the year.

7. Salaries for the year for the one employee amounted to \(\$ 40,000\). Assume the Social Security tax rate is 6 percent and the Medicare tax rate is 1.5 percent. Federal income tax withheld was \(\$ 6,500\).

8. Paid \(\$ 5,600\) for warranty repairs during the year.

9. Paid \(\$ 35,000\) of other operating expenses during the year.

10. Paid a dividend of \(\$ 6,000\) to the shareholders.

Adjustments:

11. The products sold in transaction 3 were warranted. Toro estimated that the warranty cost would be 3 percent of sales.

12. Record the accrued interest at December 31, 2011.

13. Record the accrued payroll tax at December 31, 2011. Assume no payroll taxes have been paid for the year and that the unemployment tax rate is 6.2 percent (federal unemployment tax rate is .8 percent and the state unemployment tax rate is 5.4 percent on the first \(\$ 7,000\) of earnings per employee).

Required

a. Record the above transactions in general journal form.

b. Post the transactions to \(\mathrm{T}\)-accounts.

c. Prepare an income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for 2011.