Develop an income statement

Assignment Help Accounting Basics
Reference no: EM131224179

Sanford Company -

The Sanford Company had the following balance sheet as of December 31, 20x2.  The transactions for the first three months of 20x3 are also presented along with other information about specific accounts.

Sanford Company Balance Sheet December 31, 20x2

ASSETS



LIABILITIES


Cash

$ 57,000


Accounts Payable

$ 34,000

Marketable Securities

8,000


Wages Payable

11,500

Accounts Receivable

73,000


Taxes Payable

8,000

Uncollectible Accounts

-2,000


Short-Term Notes Payable

12,000

Inventory

84,000


Interest Payable

500

Supplies

9,000


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 20x2, the company had used the gross method to record inventory purchases on account.  As of January 1, 20x3, 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, 20x2.

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, 20x3.  The interest rate is 5.0% 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 4.5%.

Bonds Payable

The bonds payable mature in twenty years.  The interest rate on the bonds is 4.0%.

Mortgage Payable

The following amortization schedule can be used for the January, 20x3 mortgage payment on the 7.0%, 30- year mortgage.

Month

Payment

Interest

Principal

Balance

 

January

 

$3,500

 

$1,867

 

$1,633

$320,000

$318,367

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, 3.0% 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 $35,000 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 4.5% 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 4.5% long-term note payable for the balance due.

Jan 5 Sanford Company declared a dividend of $2.00 per share payable on February 10, 20x3 to all shareholders of record on January 20, 20x3.

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 6.0%.  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 20x3.

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 8.0%.

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 20x3 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 20x3 was completed.

Mar 31 The bad debt expense based on the aging schedule for accounts receivable was determined for the three month period. 

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 20x3 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 20x3 was recognized.

Mar 31 The amount of interest earned on marketable securities for the three months of 20x3 was recognized.

Mar 31 The amount of interest expense for the total long-term notes payable for the first three months of 20x3 was recognized.

Mar 31 The amount of interest expense for the bonds payable for the three months of 20x3 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. 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 20x3.

3. Develop a statement of retained earnings in good form as of March 31, 20x3 for Sanford Company

4. Develop a balance sheet in good form as of March 31, 20x3 for Sanford Company.

Reference no: EM131224179

Questions Cloud

Responsibilities of health services administrators : Discuss the roles and responsibilities of health services administrators.
Identify a problem faced by people with disabilities : Select your topic and begin researching for the Program Development Paper. Your idea should be original, and for the final paper you will have to explain it in detail. (For this assignment, you do not have to address the financing of your program...
Ordering of principles demonstrate a caring attitude : Which of these is not a question for determining right action? How does this ordering of principles demonstrate a caring attitude and respect for others? What are my motives and intentions in advocating one solution rather than another?
Politics of the clinton health plan : How do patient safety, quality of care, and economic interests contribute to the need to identify critical decision support (CDS) best practices and to quantify effective CDS practices?
Develop an income statement : Supply journal entries for each of the transactions. The numbers in the journal entries can be rounded to the nearest dollar. Develop an income statement in good form for Sanford Company for the first three months of 20x3
Discussed the new rules with an attorney : A new employer policy at a dental office stated that the employees were unable to leave the office except to use the restroom, even with a patient cancellation. A husband of an employee emailed the employer that he had discussed the new rules with an..
Mission statement for the organization : Write a mission statement for the organization, concise yet appropriately descriptive of why the organization exists?
How does starbucks manage diversity : How does starbucks manage diversity? What is Starbucks doing to manage diversity in each of the 4 areas: customers, supplies, partners, and communities.
Brought charges alleging wrongful discharge : Patricia Meleen, a chemical dependency counselor, brought charges alleging wrongful discharge, defamation, and emotional distress against the Hazelden Foundation, a chemical dependency clinic, in regard to her discharge due to her alleged sexual rela..

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  Nova manufacturing applies factory overhead to products on

nova manufacturing applies factory overhead to products on the basis of direct labor hours. at the beginning of the

  Recompute its debt ratio for any subsequent

Refer to Polaris' financial statements in Appendix A for the following questions.

  Presented below is information related tohanshew real

presented below is information related tohanshew real estate agency.oct. 1nbspnbspnbsp pete hanshew begins business as

  If the business is expected to earn 16800 of the after-tax

assume that kelly giard of clean air lawn care decides to launch a new retail chain to market electrical mowers. this

  Revaluing a bond review the data in the problem 11-53

revaluing a bond review the data in the problem 11-53. suppose you purchase that bond. it is 1 year later and the

  Question regarding the tying contracts

In a celebrated 4-year antitrust case, the Department of Justice charged Microsoft Corporation with a wide range of anticompetitive behavior.

  Needs of international investors

Which of the following is the least likely means a company might choose to meet the needs of international investors?

  Management of lakeland corporation

Discuss the business as well as accounting implications of move - management of Lakeland Corporation is concerned because survey data suggest that many potential customers do not buy vehicles

  How is the allowance account related to bad debt expense

let's talk about the accounting issues related to valuation of accounts receivable and why they are important. Please include the methods for estimating the allowance for bad debt expense in your discussion. How is the allowance account related to..

  Keeping a manual accounting system

Your friend, Wendy Geiger, owns a small retail store that sells canies and nuts. Geiger acquires her goods from a few select vendors. She generally makes purchase orders by phone and on credit. Sales are primarily for cash. Geiger keeps her own ma..

  Calculates the personal and dependent exemption amount

The Brock's spend $350 each month in support of William. This support is limited to food and utilities. William spends $850 per month on medical expenses, clothing, and tuition for a community college where he is taking classes toward a degree in ..

  Wisconsin warning co plans to finance its operations by

wisconsin warning co. plans to finance its operations by issuing 5000000 of 5 year 12 bonds with interest payable

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd