Sanford Company The Sanford Company had the following balance sheet

| September 29, 2018

Sanford Company

The Sanford Company had the following
balance sheet as of December 31, 20×2.
The transactions for the first three months of 20×3 are also presented
along with other information about specific accounts.

Sanford
Company
Balance
Sheet
December
31, 20×2

ASSETS

LIABILITIES

Cash

$
57,000

Accounts Payable

$
34,000

Marketable Securities

8,000

Wages Payable

11,200

Accounts Receivable

75,000

Taxes Payable

8,000

Uncollectible Accounts

-2,000

Short-Term Notes Payable

12,000

Inventory

84,000

Interest Payable

800

Supplies

7,000

Unearned Revenue

13,000

Prepaid Insurance

6,000

Total Current Assets

$235,000

Total Current Liabilities

$
79,000

Land

$114,000

Long-Term Notes Payable

$
20,000

Equipment

227,000

Bonds Payable

100,000

Accumulated Depreciation

-87,000

Mortgage Payable

320,000

Building

560,000

Total Long-Term Liabilities

$440,000

Accumulated Depreciation

-130,000

Intangible Assets

70,000

STOCKHOLDER EQUITY

Total Long-Term Assets

$754,000

Capital Stock

$100,000

Paid in Capital

250,000

Retained Earnings

120,000

Total Stockholders Equity

$470,000

Total Assets

$989,000

Total Liabilities & Equity

$989,000

Additional
Information

Accounts Receivable
The following table indicates the
historical breakout of accounts receivable

Days

Current

30
to 60

60
to 90

Over
90

Percent of Balance

50%

30%

15%

5%

Percent Collectible

95%

90%

80%

60%

The company uses the gross method of
recording all sales on accounts.

Marketable Securities
The interest rate earned on marketable
securities is 6.0%.

Inventory
In 20×2, the company had used the gross
method to record inventory purchases on account. As of January 1, 20×3, the company is using
the net method to record inventory purchases on account.

Prepaid Insurance
A three-year insurance policy in the amount
of $7,200 was purchased on July 1, 20×2.

Equipment
Equipment is depreciated at an average
amount of $3,000 per month.

Building
The current building was purchased on
January 1, ten years ago and has an expected 40-year life at which time its
salvage value will be $40,000.

Intangible Assets
Intangible assets were initially valued at
$80,000 and are being depreciated over 40 years at $2,000 per year.

Short-Term Notes Payable
The one-year short-term notes payable are
due on March 1, 20×3. The interest rate
is 8.0% which is payable at maturity.

Long-Term Notes Payable
The long-term notes payable are due in ten
years. The interest rate on the notes is
7.5%.

Bonds Payable
The bonds payable mature in twenty
years. The interest rate on the bonds is
7.0%.

Mortgage Payable
The following amortization schedule can be
used for the January, 20×3 mortgage payment on the 10.0%, 30- year mortgage.

Month

Payment

Interest

Principal

Balance

January

$3,500

$2,667

$833

$320,000
$319,167

Capital Stock
The capital stock is common stock at $10
par value with 50,000 shares authorized, and 10,000 shares issued and
outstanding.

Journal Entries

Jan
1 Equipment with a historical
cost of $10,000 and an accumulated depreciation of $3,000 was sold for $6,000

Jan
2 Equipment with a historical
cost of $20,000 and an accumulated depreciation of $18,000 was disposed of with
an additional disposal cost of $1,300.

Jan
2 Sanford Company borrowed
$24,000 on a short-term discounted 90 day, 9.0% noninterest-bearing note
payable.

Jan
3 Sanford Company paid $18,000 in
advance for the 6 month rental of a warehouse.

Jan
3 Equipment with a historical
cost of $50,000 and an accumulated depreciation of $40,000 was traded for new
similar equipment valued at $75,000.
Sanford Company received $14,500 as a trade in for the old equipment,
paid $7,500 and established a 7.5% long-term note payable for the balance due.

Jan
4 Equipment with a historical
cost of $35,000 and an accumulated depreciation of $20,000 was traded for new
dissimilar equipment valued at $60,000.
The salvage value of the old equipment was $5,000 and the trade in value
was $7,000. Sanford paid $4,000 for the
equipment and established a 7.5% long-term note payable for the balance due.

Jan
5 Sanford Company declared a
dividend of $2.00 per share payable on February 10, 20×3 to all shareholders of
record on January 20, 20×3.

Jan
6 The amount in wages payable and
taxes payable was paid in full.

Jan
8 Sanford Company paid a total of
$18,000 on accounts payable and was able to take advantage of $1,500 in
purchase discounts for early payment.
The original inventory purchase was recorded at the full amount (gross
method).

Jan 15
Cash sales for two weeks equaled $22,000. The cost of inventory sold equaled $12,000.

Jan 20
Supplies in the amount of $4,200 were purchased for cash.

Jan 21
A customer who owed $10,000 on an account receivable, agreed to sign a
60-day note receivable with an interest rate of 8.0%. The interest earned on the note will be paid
at the maturity date of the note receivable.

Jan 29
The balance of $14,500 in accounts payable was paid.

Jan 30
The company purchased $45,000 of inventory on account with the terms
2/10, net 30. The company has decided to
switch to the net method for all inventory purchases on account beginning in
20×3.

Jan 31
Cash sales for two weeks equaled $24,000. The cost of inventory sold equaled $13,000.

Jan 31
Sales on account for the month of January totaled $55,000 with the terms
2/10, net 30. The cost of inventory sold
equaled $26,000.

Jan 31
The unearned revenue represented the rental of special equipment that
was used by another company on weekends.
$4,000 of the revenue was earned in January.

Jan 31
Collected cash of $48,000 from the accounts receivable, plus there was a
total sales discount of $1,000 for the payment of receivables within the ten
day discount period.

Jan 31
Salary expenses in the amount of $14,000 and tax expenses in the amount
of $8,000 were paid.

Jan 31
The utility bill of $2,500 was paid.

Jan 31
A bill in the amount of $3,600 for advertising expenses incurred during
the month of January was received.

Jan 31
The monthly payment for January of the mortgage payable was made.

Feb
1 The Sanford Company made a new
issue of 5,000 shares of common stock for cash.
The market price of the stock was $40 per share.

Feb
2 A petty cash fund in the amount
of $500 was established.

Feb
3 The Sanford Company bought back
1,000 shares of its own common stock for $40 per share.

Feb
8 The purchase of inventory on
account on Jan 30th was paid in full.

Feb 10
Sanford Company sold the note receivable from Jan 21st to the
bank, which discounted the note at 12.0%.

Feb 15
Cash sales for two weeks equaled $20,000. The cost of inventory sold equaled $11,000.

Feb 20
The company purchases $20,000 of inventory on account with the terms
2/10, net 30.

Feb 27
The company paid an advertising bill for $5,600 which included the
February advertising expense of $2,000 plus the balance due from January.

Feb 28
Cash sales for two weeks equaled $25,000. The cost of inventory sold equaled $14,000.

Feb 28
The monthly payment for February of the mortgage payable was made.

Feb 28
The company collected cash of $59,000 from the accounts receivable, plus
there was a total sales discount of $1,100 for the payment of receivables
within the ten day discount period.

Feb 28
Salary expenses in the amount of $21,000 and tax expenses in the amount
of $9,000 were paid.

Feb 28
The utility bill of $2,100 was paid.

Feb 28
Sales on account for the month of February totaled $60,000 with the
terms 2/10, net 30. The cost of
inventory sold equaled $30,000.

Mar
1 The short-term note payable
that was due on March 1st plus all appropriate interest was paid.

Mar
3 The amount of the petty cash
fund was increased by $200.

Mar 10
Supplies in the amount of $2,700 were purchased for cash.

Mar 15
Cash sales for two weeks equaled $27,000. The cost of inventory sold equaled $15,000.

Mar 20
Sanford Company reissued 300 shares of its own stock for $42 per share.

Mar 21
The bank notified Sanford Company that the note receivable from January
21st had not been paid. The bank collected the amount of the note
plus the interest due and a $20 protest fee from Sanford Company. Sanford Company charged the full amount of
the note receivable plus related fees against the customer’s account receivable
balance.

Mar 25
The company purchased $50,000 of inventory on account with the terms
2/10, net 30.

Mar 28
The purchase of inventory on account on Feb 20th was paid in full.

Mar 29
The petty cash fund had $150 in cash and receipts in total amounts for
the following expense categories:
entertainment$160, travel $170, postage $90, and supplies $115. The petty cash fund was replenished.

Mar 30
Cash sales for two weeks equaled $20,000. The cost of inventory sold equaled $11,000.

Mar 30
The unearned revenue represented the rental of special equipment that
was used by another company on weekends.
$9,000 of the revenue was earned in March.

Mar 31
Sales on account for the month of March totaled $67,000 with the terms
2/10, net 30. The cost of inventory sold
equaled $36,000.

Mar 31
Salary expenses in the amount of $16,000 and tax expenses in the amount
of $7,000 were paid.

Mar 31
Collected cash of $70,000 from the accounts receivable, plus there was a
total sales discount of $1,200 for the payment of receivables within the ten
day discount period.

Mar 31
A warehouse building was acquired for $250,000. Closing costs on the acquisition equaled
$7,000, and there were costs of $10,300 to get the building into an operational
condition to be used by Sanford Company.
Employee salaries specifically related to the building renovation were
an additional $5,400. This salary
expense was part of the normal monthly expenses and would have been incurred
regardless of whether the employees worked on the warehouse or did other
activities within the company. Sanford
Company paid $100,000 in cash as a down payment with the balance due being
added to the mortgage payable account.

Mar 31
The utility bill of $3,000 was paid.

Mar 31
Sanford Company repaid the 90 day discounted note payable from January 2nd in
full.

Mar 31
The equipment depreciation entry for the three months of 20×3 was
completed.

Mar 31
The depreciation entry for the building for the months of January,
February, and March was entered.

Mar 31
The amortization of intangible assets for the three months of 20×3 was
completed.

Mar 31
The bad debt expense based on the aging schedule for accounts receivable
was determined for the three month period.
Note: The total balance in accounts receivable should be $76,853.

Mar 31
Salary expenses incurred during the month of March but not yet paid
equaled $8,400 and tax expenses equaled $2,800.

Mar 31
A physical inventory of supplies indicated a total amount of $5,000 of
supplies still on hand.

Mar 31
A customer sent an advance payment of $10,000 for the use of special
equipment in April and May.

Mar 31
The amount of rent expense for the warehouse for the first three months
of 20×3 was recognized.

Mar 31
Sanford Company provided services to a customer in the amount of $3,000
during March but a bill has not been sent.

Mar 31
The amount of insurance expense for the first three months of 20×3 was
recognized.

Mar 31
The amount of interest earned on marketable securities for the three
months of 20×3 was recognized.

Mar 31
The amount of interest expense for the total long-term notes payable for
the first three months of 20×3 was recognized.

Mar 31
The amount of interest expense for the bonds payable for the three
months of 20×3 was recognized.

Mar 31
The monthly payment for March of the mortgage payable was made.

Required

1. Supply
journal entries for each of the transactions. You should number the entries in
some way to keep track of your work. The
numbers in the journal entries can be rounded to the nearest dollar.

2. Develop an
income statement in good form for Sanford Company for the first three months of
20×3.

3. Develop a
statement of retained earnings in good form as of March 31, 20×3 for Sanford
Company

4. Develop a
balance sheet in good form as of March 31, 20×3 for Sanford Company.

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