T-account entries and balance sheet preparation. Patterson Manufacturing Corporation begins operations on January 1. See the assumptions given at the end of the list. The firm engages in the following transactions during January:

(1) Issues 15,000 shares of \(\$ 10\)-par value common stock for \(\$ 210,000\) in cash.

(2) Issues 28,000 shares of common stock in exchange for land, building, and equipment. The land appears at \(\$ 80,000\), the building at \(\$ 220,000\), and the equipment at \(\$ 92,000\) on the balance sheet.

(3) Issues 2,000 shares of common stock to another firm to acquire a patent.

(4) Acquires raw materials with a list price of \(\$ 75,000\) on account from suppliers.

(5) Acquires manufacturing equipment with a list price of \(\$ 6,000\). It deducts a \(\$ 600\) discount and pays the net amount in cash. The firm treats cash discounts as a reduction in the acquisition cost of equipment.

(6) Pays freight charges of \(\$ 350\) for delivery of the equipment in (5).

(7) Discovers that raw materials with a list price of \(\$ 800\) are defective and returns them to the supplier for full credit. The raw materials had been purchased on account-see (4)—and no payment had been made as of the time that the goods were returned.

(8) Signs a contract for the rental of a fleet of automobiles beginning February 1. Pays the rental for February of \(\$ 1,400\) in advance.

(9) Pays invoices for raw materials purchased in (4) with an original list price of \(\$ 60,000\), after deducting a discount of 3 percent for prompt payment. The firm treats cash discounts as a reduction in the acquisition cost of raw materials.

(10) Obtains fire and liability insurance coverage from Southwest Insurance Company. The two-year policy, beginning February 1, carries a \(\$ 400\) premium that has not yet been paid.
(11) Signs a contract with a customer for \(\$ 20,000\) of merchandise that Patterson plans to manufacture. The customer advances \(\$ 4,500\) toward the contract price.
(12) Acquires a warehouse costing \(\$ 60,000\). The firm makes a down payment of \(\$ 7,000\) and assumes a long-term mortgage for the balance.
(13) Discovers that raw materials with an original list price of \(\$ 1,500\) are defective and returns them to the supplier. This inventory was paid for in (9). The returned raw materials are the only items purchased from this particular supplier during January. A cash refund has not yet been received from the supplier.
(14) On January 31, the firm purchases 6,000 shares of \(\$ 10\)-par value common stock of the General Cereal Corporation for \(\$ 95,000\). This purchase is a short-term use of excess cash. The shares of General Cereal Corporation trade on the New York Stock Exchange.
The following assumptions will help you resolve certain accounting uncertainties: (i) transactions (2) and (3) occur on the same day as transaction (1); and (ii) the invoices paid in (9) are the only purchases for which suppliers made discounts available to the purchaser.

a. Enter these transactions in T-accounts. Indicate whether each account is an asset, a liability, or a shareholders' equity item. Cross-reference each entry to the appropriate transaction number.

b. Prepare a balance sheet as of January 31 .