Question

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.

Required

2.   Develop an income statement in good form for Sanford Company for the first three months of 20x3.

Answer 1

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