LIV. ILLUSTRATION OF SINGLE ENTRY

LIV. ILLUSTRATION OF SINGLE ENTRY

=Opening Entries.=—In opening a set of single-entry books, as complete a record should be made as under double entry. If the proprietor begins business with an investment of cash only and without any obligations, an entry in the cash book of the amount invested as a credit to the proprietor’s capital account is all that is necessary. If the investment consists of a variety of properties and liabilities to creditors, and obligations on leases, salaries, etc., are assumed, a very careful and complete record should be made in the journal, showing the kinds and values of the properties invested, and the kinds and amounts of the liabilities assumed. This is best arranged in schedule or statement form, with extension into the posting money columns only of those personal items for which accounts are to be opened in the ledger. Illustration will be given of a simple set of single-entry books, the journal, cash book, sales and purchase records, and the ledger. In order that the entries may be traced, a separate statement or diary of the transactions will be given, covering in summarized form a six months’ period.

PROBLEM. June 30, 19—, A. B. Cornell purchased a store and business, paying $7,750.

He took over the following assets and liabilities at the values shown:

Store building and lot $3,000. Furniture and fixtures $500. Horse and wagon $250. Accounts receivable: B. C. Davis $50; C. D. Elliot $75; D. E. Foley $100; E. F. Gaynor $25; F. G. Harvey $125. Stock of merchandise $5,250. Mortgage on real estate $500.

Accounts payable: G. H. Jackson & Co. $250; H. J. Kelsey $375; J. K. Landon Co. $500.

He deposited $500 as an additional investment.

During the six months the following transactions took place:

Cash sales $10,000. Sales on account: Davis $300; Elliot $400; Foley $500; Gaynor $600; Harvey $700. Purchases were: Cash $3,500; Jackson & Co. $500; Kelsey $450; Landon $750; Morey & Co. $1,000. Cornell returned goods to Morey & Co. $50, and received an allowance from Kelsey $20. He made Harvey a rebate of $25. He received cash on account from Davis $250; Elliot $300; Foley $400; and notes from Gaynor $250 and Harvey $500. He paid on account cash to Morey & Co. $500; Jackson & Co. $600; Kelsey $675. He gave his note for $1,000 to Landon. He paid off the mortgage with interest $530. Expenses paid were: Clerks $750; cashier, stenographer, etc., $250; N. Y. C. Ry. for freight $250; horse feed and expense of driver $125; newspaper and street-car advertising $300. Cornell drew $2,000, and made an additional investment of a safe valued at $250.

At the close of the year inventories and appraisals of data not on the ledger were as follows:

Store building and lot $2,970. Furniture and fixtures $725. Horse and wagon $235. Merchandise $3,000. Notes receivable $750, with accrued interest $2.50. Notes payable $1,000, with accrued interest $15. Accrued salaries and expenses $25. It was decided to value the accounts receivable at face value less 2%.

JOURNAL ============================================================= 19— June 30 A. B. Cornell commenced business, purchasing the store and stock of the ........ Company, taking over all its assets and assuming all its liabilities and obligations. He deposited $500 as a working fund for the business. The following shows his investment assets and obligations:

Assets L.F. Items Dr. Cr. Store Bldg. and Lot 3,000.00 Furniture and Fixtures 500.00 Horse and Wagon 250.00 Merchandise 5,250.00 Accounts Receivable: B.C. Davis Dr. 50.00 5 50.00 C.D. Elliot Dr. 75.00 5 75.00 D.E. Foley Dr. 100.00 5 100.00 E.F. Gaynor Dr. 25.00 5 25.00 F.G. Harvey Dr. 125.00 375.00 5 125.00 ------ Cash 500.00 ------ Total Assets 9,875.00

Liabilities Mortgage on Real Estate 500.00 Accounts Payable: G. H. Jackson & Co. Cr. 250.00 5 250.00 H. J. Kelsey Cr. 375.00 5 375.00 J. K. Landon Co. Cr. 500.00 1,125.00 5 500.00 ------ -------- Total Liabilities 1,625.00 -------- A. B. Cornell, Capital Cr. 6 8,250.00 8,250.00

Dec. 31 Morey & Co. Dr. 5 50.00 Returned goods as unsatisfactory. H. J. Kelsey Dr. 5 20.00 Allowance a/c inferior goods. F. G. Harvey Cr. 5 25.00 Rebate a/c dissatisfaction. E. F. Gaynor Cr. 5 250.00 Note at 3 mo. 6% on a/c. F. G. Harvey Cr. 5 500.00 Note at 60 da., no interest on a/c. J. K. Landon Co. Dr. 5 1,000.00 Note at 6 mo. 6% on a/c. A. B. Cornell, Capital Cr. 6 250.00 Made additional investment of office safe. -------- --------- 1,445.00 10,400.00 ======== =========

JOURNAL ====================================================================== 19— L.F. Items Dr. Cr. Dec. 31 FINANCIAL STATEMENT Assets Store Bldg. and Lot 2,970.00 Furniture and Fixtures 725.00 Horse and Wagon 235.00 Merchandise 3,000.00 Accounts Receivable: B.C. Davis 100.00 C.D. Elliot 175.00 D.E. Foley 200.00 E.F. Gaynor 375.00 F.G. Harvey 300.00 -------- 1,150.00 Less— Bad Debts est. 23.00 1,127.00 Notes Receivable 750.00 Accrued Interest on above 2.50 Cash 1,970.00 -------- Total Assets 10,779.50

Liabilities Notes Payable 1,000.00 Accrued Interest on above 15.00 Accounts Payable: G. H. Jackson & Co. 150.00 H. J. Kelsey 130.00 J. K. Landon Co. 250.00 Morey & Co. 450.00 ------ 980.00

Accrued Salaries and Expenses 25.00 ------- Total Liabilities 2,020.00 -------- Net Worth 8,759.50

A.B. Cornell, Capital, 6/30 8,250.00 Additional Investment 250.00 -------- 8,500.00 Drawings 2,000.00 -------- 6,500.00 Net profit this period 2,259.50 8,759.50 -------- ======== A.B. Cornell, Personal Cr. 6 2,259.50 To carry the net profit to Cornell’s Personal account. A.B. Cornell, Personal Dr. 6 259.50 A.B. Cornell, Capital Cr. 6 259.50 To transfer the balance of profit left in the business to Cornell’s Capital account. ------ -------- Totals 259.50 2,519.00 ====== ========

Dr. CASH CASH Cr. =========================================================================== 19— | 19— June 30 |Dec. 31 A. B. Cornell ✔ 500.00|Purchases 3,500.00 Dec. 31 Sales 10,000.00|Morey & Co. on a/c 5 500.00 500.00 B.C. Davis on a/c 5 250.00 250.00|Jackson & Co. ” 5 600.00 600.00 C.D. Elliot ” 5 300.00 300.00|H.J. Kelsey Co. ” 5 675.00 675.00 D.E. Foley ” 5 400.00 400.00|Mortgage and | Interest 530.00 |Clerks 750.00 |Cashier | Stenographer, 250.00 |N.Y.C. Ry. Freight 250.00 |Horse Feed and | Driver Expense 125.00 |Newspaper | Advertising 300.00 |A.B. Cornell 6 2,000.00 2,000.00 |Balance 1,970.00 ------ ---------| -------- --------- 950.00 11,450.00| 3,775.00 11,450.00 ====== =========| ======== ========= 19— | Jan. 2 Balance 1,970.00|

SALES JOURNAL ======================================================== 19— Dec. 31 Cash 10,000.00 B. C. Davis 5 300.00 C. D. Elliot 5 400.00 D. E. Foley 5 500.00 E. F. Gaynor 5 600.00 F. G. Harvey 5 700.00 --------- Sales on Account 2,500.00 --------- Sales for Cash 10,000.00 10,000.00 --------- Total Sales 12,500.00 ========= =======================

PURCHASE JOURNAL ======================================================== 19— Dec. 31 Cash 3,500.00 G. H. Jackson & Co. 5 500.00 H. J. Kelsey 5 450.00 J. K. Landon Co. 5 750.00 Morey & Co. 5 1,000.00 -------- Purchases on Account 2,700.00 --------- Purchases for Cash 3,500.00 3,500.00 -------- Total Purchases 6,200.00 ========= ========================

B. C. DAVIS =========================================================== 19— | 19— June 30 J2 50.00 | Dec. 31 C4 250.00 Dec. 31 S4 300.00 |

C. D. ELLIOT =========================================================== 19— | 19— June 30 J2 75.00 | Dec. 31 C4 300.00 Dec. 31 S4 400.00 |

D. E. FOLEY =========================================================== 19— | 19— June 30 J2 100.00 | Dec. 31 C4 400.00 Dec. 31 S4 500.00 |

E. F. GAYNOR =========================================================== 19— | 19— June 30 J2 25.00 | Dec. 31 J2 250.00 Dec. 31 S4 600.00 |

F. G. HARVEY =========================================================== 19— | 19— June 30 J2 125.00 | Dec. 31 J2 25.00 Dec. 31 S4 700.00 | ” ” ” 500.00

G. H. JACKSON & CO. =========================================================== 19— | 19— Dec. 31 C4 600.00 | June 30 J2 250.00 | Dec. 31 P4 500.00

H. J. KELSEY =========================================================== 19— | 19— Dec. 31 J2 20.00 | June 30 J2 375.00 ” ” C4 675.00 | Dec. 31 P4 450.00

J. K. LANDON CO. =========================================================== 19— | 19— Dec. 31 J3 1,000.00 | June 30 J3 500.00 | Dec. 31 P4 750.00

MOREY & CO. =========================================================== 19— | 19— Dec. 31 J2 50.00 | Dec. 31 P4 1,000.00 ” ” C4 500.00 |

A. B. CORNELL, PERSONAL =========================================================== 19— | 19— Dec. 31 C4 2,000.00 | Dec. 31 J3 2,259.50 ” ” J3 259.50 | ======== | ========

A. B. CORNELL, CAPITAL ============================================================== | 19— Net Worth (down) 8,759.50 | June 30 J2 8,250.00 | Dec. 31 J3 250.00 | ” ” J3 259.50 -------- | -------- 8,759.50 | 8,759.50 ======== | ====== ======== | 19— | Jan. 1 8,759.50

LEDGER LIST (BEFORE CLOSING) B. C. Davis $ 100.00 C. D. Elliot 175.00 D. E. Foley 200.00 E. F. Gaynor 375.00 F. G. Harvey 300.00 G. H. Jackson & Co. $ 150.00 H. J. Kelsey 130.00 J. K. Landon Co. 250.00 Morey & Co. 450.00 A. B. Cornell, Personal 2,000.00 A. B. Cornell, Capital 8,500.00 --------- --------- $3,150.00 $ 9,480.00 3,150.00 ---------- Excess of credits $ 6,330.00 ==========

PROOF

Total postings from Journal $1,445.00 $10,400.00 ” ” ” Sales Journal 2,500.00 ” ” ” Purchase Journal 2,700.00 ” ” ” Cash Book 3,775.00 950.00 --------- ---------- $7,720.00 $14,050.00 7,720.00 ---------- Excess of credits as above $ 6,330.00 ==========

=Net Profits.=—Inasmuch as the change in proprietorship is determined only by a comparison of the two financial statements, at least the result of the comparison should be incorporated into a journal entry and so be brought into the ledger account. Sometimes the statement itself and the calculation of change in net worth are made on the face of the journal, thus making permanent record of them. This is worth while since they are an essential part of the system. A permanent statement book will accomplish the same result. In the illustration the statement is entered in the journal. The net profit of $2,259.50 may be set up in the proprietor’s personal account, and the balance of that account, being the amount of profits retained in the business, transferred to the capital account; or the net amount left in the business may be transferred directly to the capital account and the personal account ruled off without balancing as suggested in Chapter LIII. The same result is accomplished, but the ability to prove postings against the books of original entry is lost. Hence the first method which is the one shown in the illustration is the better.

APPENDIX A

PRACTICE WORK FOR STUDENT—FIRST HALF-YEAR

Accounting principles cannot be mastered without adequate practice work. Practice work cannot be properly done unless the principles on which it is based have been developed and explained. Practice work should, so far as possible, follow closely after the explanation of new principles. This applies particularly to the introductory work of the first half-year. Later work is cumulative in its effect and may use all principles previously developed as well as the new principles just developed.

The practice work for the first half-year consists largely of disconnected problems. However, a few longer problems running through several assignments are included. Effort has been made to keep to a minimum the purely mechanical work of computation. While emphasis should be placed always on the principles involved, the need for accuracy should not be lost sight of; in its practice in business, accountancy requires accurate and, where possible, proven results.

Of the budget of stationery provided for this work, the loose-leaf supplies—statement, journal, and ledger paper—are for the first half-year’s work. The three-column paper is to be used for balance sheet and profit and loss statements, unless other directions are given for particular assignments. The use of journal and ledger paper is indicated where necessary. Observance of directions given and of forms to be followed, together with careful and accurate work in drafting solutions, will save much time in the location and correction of errors.

Sufficient practice work is furnished to accompany 30 hours of lecture or classroom work, opportunity being provided for two review periods, one at mid-term and one at the close of the semester. Where the lecture period is two hours in length—the class usually meeting but once a week—two of these assignments should be given to accompany each such lecture period. The student should make his solutions as a part of his home-work and these should be taken up for discussion at the next class session and correct solutions should be presented there so that always the student may have a criterion with which to compare his own work. Where more practice work is desired than is provided in this appendix, a collection of miscellaneous problems is given in Appendix C.

I 1. On January 1, 19—, H. L. Lewis has the following property:

Bank deposit $1,893.74. Merchandise $14,987.42. Office equipment: safe, desk, counters, cash register, $850. Delivery equipment $836. Securities held as investments $6,950. Accounts due him from customers as follows: John Morris $ 90.87. Peter Conley $135. Chas. Grant $742.93. Frank Hewitt $157.48. L. M. Moore $790.72. N. T. Taylor $48.95. A. S. Keene $75.

For merchandise bought there remains unpaid:

To Jones Bros. $1,350.45. ” T. J. Langdon $890. ” Stewart & Co. $965. ” T. M. Lawes & Co. $4,862.97. And a note for $125.

Draw up a statement to show H. L. Lewis’ capital as of the above date.

2. From the following information determine the total amount of the liabilities:

Cash in bank $840. Goods on hand $2,500. Accounts receivable $1,600. Supplies on hand $320. The year’s rent $600, was paid in advance and the premises have now been occupied for six months. The capital is $2,500.

3. From the following items in a balance sheet, which is complete except as to the asset cash, determine the amount of cash:

Capital $2,500. Supplies $87.50. Real estate $2,500. Ford delivery truck $575. Accounts receivable $2,280. Accounts payable $1,800. Notes receivable $300. Notes payable $500. Salaries due but unpaid $50. Mortgage on real estate $1,000.

4. The following data, complete excepting for the amount of a certain mortgage and interest accrued thereon, are taken from the records of Benjamin Goodwin for the year ending June 30, 19—. Determine the face amount of the mortgage payable, and the amount of the interest accrued thereon at 6% for one year.

Cash on hand $75, and subject to check $1,200. Factory $6,100. Land $2,000. Office furniture $185. A three-year insurance premium was bought one year ago for $300. Accounts receivable $4,500. Goods on hand $2,800. Goods in process of manufacture $1,450. Raw materials inventory $2,250. Supplies $295. Accounts payable $9,150. Notes payable $4,650. Accrued wages $135. Mortgage payable and interest. Capital $5,000.

5. The following was taken from the books of the treasurer of the Yorktown Lodge: Balance in Fifth National Bank, January 1, 19—, $689.22. The receipts during the year were: Proposition fees $515. Initiation fees $2,510. Lodge dues $4,904.60. Interest on Liberty bonds $332.14.

Summary disbursements for the year were:

Grand lodge dues $554. Printing and postage $818.25. Entertainment $2,199.86. Sundries $216.20. Returned proposition fees $80. Rent for lodge room $750. Salaries $387.50. Charity $1,211.84. Supplies $38.80. Testimonial dinner $846.48.

There is also cash $4,498.67, on deposit in the Irving Savings Bank December 31, 19—, on which interest at the rate of 4% per annum is now due for one-quarter. The treasurer holds $10,000 in Liberty bonds.

Submit statement showing the available balance of cash for the new year.

II 1. Make up three problems, using your own data, to illustrate the three types of business organization.

2. On January 2, 19—, Allen B. Dawes has in his business the following assets and liabilities which you are to classify for balance sheet purposes according to the definitions which have been given, changing the descriptions here used to standard titles:

Alongside of a railroad spur, on a plot 100 by 75 feet, costing $2,500, Dawes has erected a plant for $12,000, for a part of which he is still indebted to the Mutual Savings Bank, which debt is secured by a claim for $5,000 against the property. In the plant Dawes has installed stationary operating apparatus amounting to $19,750, and loose operating parts and supplementary devices amounting to $250. The value of the models and patterns which he uses amounts to $1,215. His stock, totaling $12,215, is in three distinct phases or conditions: Raw materials $4,305. Partly finished or in process goods $4,020. Completed stock $3,890. In the plant Dawes has $725 worth of furniture. In the bank he has a balance of $940 and $83.50 in the safe. Some of his customers owe him for goods bought, the total being $5,397.50 on open account and $875 on signed promises to pay. Dawes owes creditors on account $4,857.50. He has formally acknowledged and accepted drafts amounting to $543.50. He is liable for a pay-roll of $150, earned but not yet due.

Draw up a statement showing assets, liabilities, and net worth, using standard titles.

3. Dawes has reached a point where it is not only profitable but really necessary to expand his business if he is to retain the good-will of his old customers and secure new ones. He has therefore persuaded Edward A. Robbins, a capitalist, to put cash into the business equal to Dawes’ net interest and so become a partner with him.

The partnership uses $3,100 of this new capital to purchase additional raw material, and $2,500 for some partly finished stock (bought at a sacrifice sale). They spend $1,600 for new machinery, $250 for tools, and $100 for new patterns. With an eye toward future building facilities they acquire another and adjoining strip of property with a building on it. The latter costs them $5,470 and the land $2,500.

To facilitate securing and delivering goods, the partners invest $1,800 in a small truck. They add shop furniture amounting to $80.

These various deals were consummated by the early afternoon of January 2, 19—. The partners ask you for a new balance sheet to show the condition of the business and the respective interests of each.

4. At the end of the year’s operation, Dawes & Robbins ask you to draw up a statement of assets, liabilities, and net worth, the following figures being submitted:

Balance of cash in the bank $28,000. Accounts owing the partnership $12,000; notes $6,000. The inventory is again split up into: Raw materials $9,000. Partly finished goods $5,000. Finished stock $500. Still on hand unused: Advertising material $640. Oil, waste, and supplies $500. Packing supplies $750. Other assets: Models and patterns $500. Loose tools $75. Shop furniture is to be shown at the last balance sheet figure less an estimated depreciation in value of $161. Machinery in the same manner less depreciation of $2,669. Delivery equipment less depreciation of $360. Factory less depreciation of $3,498. Land as it was on the last balance sheet. Liabilities are as follows: Accounts owing to creditors $1,000. Notes $250. Accrued pay-roll $200. The mortgage had been reduced to $2,000.

5. Robbins is anxious to withdraw from active participation in the partnership. To facilitate this and to secure additional funds with which to buy new models and other things needed for the growing business, it had been decided some time ago to incorporate and to dispose of some of the stock to outsiders. The necessary steps had already been taken. In accordance therewith the corporation takes over the business at the values shown in the balance sheet of Problem 4, with the exception of $14,252 cash which Robbins retains. For the good-will of the business the corporation gives the partners $15,000 of its capital stock. $25,000 of the capital stock is sold to outsiders for $25,000 cash. The rest of the capital stock is used in purchasing the partnership.

Set up the balance sheet of the corporation.

III 1. A. K. Sutton is proprietor of hardware store. On June 30, 19—, he has the following assets and liabilities:

Bank deposits $1,980.47. Notes receivable $450. Accounts due from customers: L. M. Taylor $190. L. K. Jones $275. G. Sanford $18.73. F. Daly $87.54. C. Baker $103.13.

Merchandise inventory $4,745. Office equipment $135. Delivery equipment $575.

He owes: First National Bank $565. Chas. Goodwin $487.97. L. Birch $150. H. Tuttle $92.50. James Bros. $325.

Sutton’s 60-day promissory note for $200 with interest at 6% is due today, but payment is deferred, with consent of the creditor, to tomorrow morning.

On the above date Sutton buys out the automobile accessory business of his neighbor, A. M. Lawrence, and combines it with his own. The deal was completed on the basis of the balance sheet submitted below, except that Lawrence is to retain the cash. Sutton pays Lawrence in cash from his hardware business. Lawrence’s balance sheet contains the following items:

Cash $347.90. Accounts receivable: Taxi Service, Inc. $49.50. The Market Shops $18.50. Whitney’s Delivery Service $80. Merchandise inventory $1,597. Delivery equipment $475. Office equipment $90. Accounts payable $850.

Draw up a balance sheet to show Sutton’s condition after his purchase of Lawrence’s business.

Why is Sutton’s net worth the same as before buying Lawrence’s business?

Instructions

Show accounts receivable and accounts payable as totals, with a supplementary schedule listing each separately.

2. From the following particulars prepare a balance sheet of the Mountel Manufacturing Company as of December 31, 19—: Premises $2,500. Machinery $11,500. Buildings $5,300. Capital stock $30,000. Stock-in-trade: finished goods $12,500; goods in process of manufacture $8,670; and raw materials $4,980. Loose tools $490. Models and patterns $650. Patents $1,000. Good-will $3,000. Trade creditors $15,540. Cash $50. Motor truck $1,580. Bank deposits $1,740. Outstanding claims against customers on open account $8,975. A 60-day note payable for $1,000 had been discounted at the bank at 6% and is due in 30 days. Office equipment $250. Supplies $500. Notes receivable $4,970. First National Bank stock and other investments $4,000. Unexpired insurance premium $150. Accrued wages $75. Other notes payable outstanding amount to $8,960. Purchase money mortgage on machinery $5,500, due in 18 months. Mortgage on buildings $2,000, due in six months. Unpaid motor truck expense $85.

It is estimated that during the year machinery has depreciated 10% and buildings 5% from the values shown above. Investigation shows that the present market value of finished goods is 75% of that carried on the books, goods in process 90%, and raw materials 100%. It is decided to reduce the values of stock-in-trade to present price levels. A reserve of 5% is to be created for bad debts, 50% for models and patterns, and 20% for the delivery truck. Loose tools are valued at $245.

3. The Cordovan Tanning Company has issued $3,000,000 of capital stock. It suffered heavy losses due to the drop in prices during the year. The following balance sheet submitted to the stockholders as of December 31, 19—, showed: Cash on hand $1,805; on deposit $378,090. Customers’ acceptances unmatured $249,754. U. S. Liberty bonds $47,500. General investments $82,950. Loans receivable $15,280. Income accrued on investments $3,450. Accounts receivable $2,948,582. Reserve for doubtful accounts $56,125. Notes receivable $82,000. Prepaid insurance $14,950. Finished goods $750,000. Goods in process $697,974. Raw materials $460,900. Plant and equipment, $4,980,760. Depreciation reserve for plant and equipment was $460,640. Accounts payable $1,980,760. Notes payable $350,000. Dividends payable January 15 of the next year, and constituting a present liability of the company $230,000.

From the following information and the balance sheet as of December 31, 19—, prepare the balance sheet as of December 31 one year later.

Cash on hand December 31 was $1,790; on deposit $162,875. Customers’ acceptances unmatured $449,500. The market value of the Liberty bonds was $46,000, and general investments $50,000. Loans receivable $16,000. Income accrued on investments $1,800. Accounts receivable $2,310,000. Reserve for doubtful accounts $60,000. Notes receivable $150,000. Prepaid rent $2,400. During the year $380,000 worth of goods was added to finished stock, and $420,000 at cost price was sold. It is decided that the balance must be marked down 50% to conform to market replacement costs. Goods now in process are valued at $315,890. Raw materials carried on the books at $670,000 are to be written down 30% to market value. 5% of the cost of plant and equipment is to be added to the reserve for depreciation. Accounts payable $3,670,980. Notes payable $1,475,000. A dividend of 5% had been declared and was payable January 15 of the next year.

4. By comparing the two December 31 balance sheets of the Cordovan Tanning Company, what can you tell as to the progress of the company during the year? Did it make a profit or suffer a loss?

IV 1. Draw up a comparative balance sheet as of December 31, 19— of the Interurban Railway Company, from the balance sheets of December 31, 19— and December 31 of the previous year.

Balance sheet of 19— showed: Cash $40,909.18. Accounts receivable $33,097.49. Securities deposited with Workmen’s Compensation Commission $4,893.75. Materials and supplies $27,112.28. Prepaid insurance $5,732.16. Work in progress $7,509.81. Road and equipment $696,622.49. Accounts payable $17,058.81. Notes payable $70,000. Accrued interest on first mortgage bonds $3,645.84. Accrued taxes $6,450.65. Depreciation reserve for road and equipment $19,995.96. Surplus $223,725.90. Capital stock $300,000. First mortgage 5% bonds $175,000.

Balance sheet of the year previous showed: Cash $34,313.78. Accounts receivable $57,779.47. Securities deposited with Workmen’s Compensation Commission $4,893.75. Materials and supplies $29,308.56. Insurance prepaid $3,639.19. Work in progress $98.64. Road and equipment $694,216.73. Depreciation reserve for road and equipment $15,813.46. Capital stock $300,000. Accounts payable $25,973.61. Notes payable $100,000. Accrued interest on bonds $3,645.84. Accrued taxes $8,872.31. First mortgage bonds $175,000. Surplus $194,944.90.

2. Can you tell definitely and in detail how the increase in surplus in Problem 1 was effected?

3. The annual report of the Northeastern Power Company for year ending December 31, 19—, gave the following balance sheet as of December 31, 19—:

Investments in subsidiary companies $4,244,855.57. Cash $1,927,898.84. Accounts receivable $1,514,605.11. U. S. Government Liberty Loan 4¼% bonds $915,102. Canadian Victory Loan 5½% bonds $497,769.88. Securities deposited with State Workmen’s Compensation Commission $8,893.75 Other securities $241,001. Mortgages owned $13,500. Materials and supplies $364,410.81. Work in progress $12,931.10. Prepaid insurance $231,350.66. Prepaid taxes $624,744.28. Real estate, plant and transmission systems $48,230,896.04. Mortgage on real estate $15,000. Accounts payable $867,763.35. Accrued taxes $707,870.94. Interest payable $213,896.68. Dividends payable $201,519.50. First mortgage 5% bonds $10,000,000. 6% refunding mortgage bonds $8,226,000. 6% debentures $10,200,000. Depreciation reserve $2,254,476.13. Surplus $138,932.44. Capital stock outstanding $26,002,500.

The report for the following year gives the following particulars as to the balance sheet of that year:

Cash $1,677,663.43. Accounts receivable $1,286,731.23. U. S. Liberty bonds 4¼% $1,106,452. Canadian Victory Loan 5½% bonds $747,769.88. Securities deposited with State Workmen’s Compensation Commission $8,893.75. Other securities $170,501. Mortgages owned $15,500. Materials and supplies $391,645. Prepaid insurance $355,302.71. Investments in subsidiary companies $1,406,325.67. Prepaid taxes $607,575.33. Real estate, plant, and transmission systems $53,470,089.04. There were no changes in the various bond issues nor in the capital stock during the year. Mortgages on real estate $20,000. Accounts payable $875,214.37. Notes payable $1,650,000. Accrued taxes $484,806.02. Interest payable $215,509.58. Dividends payable $201,519.50. Reserves for depreciation $2,532,715.94.

Draw up a comparative balance sheet and determine the profit for the year.

4. Make an analytical statement showing the effect on the various assets and liabilities of the profits made during the year.

5. Discuss these changes and so far as possible show how they were brought about.

V 1. On December 31, 19—, James Good’s books revealed the following facts:

Cash $25,000. Due from customers $130,000. Plant and equipment $100,000. Other assets $15,000. Due creditors for merchandise $55,000. Accrued expenses $7,980. Mortgage on plant $50,000. Other liabilities $49,500. Merchandise now on hand $67,800. Capital at beginning of year $150,000. Drawings during the year $10,000. Sales $300,000. Initial inventory $75,000. Purchases $200,000. Selling expenses $30,000. General administrative expenses $27,480.

Draw up a balance sheet with the net worth section expanded to show the operations for the year.

2. On January 2, 19—, the value of the goods on A. R. Knight’s shelves amounted to $85,980, and he bought $275,600 worth during the year. On December 31 of the same year the inventory was $106,720. What was the amount of gross sales, if gross profits were $96,000 and returned sales $17,500?

3. Expenses for conducting Knight’s business for the year were as follows:

Salesmen’s salaries $18,750. Advertising $2,750. Expenses of shipments $4,580. Office help $12,800. Rent $18,000. Insurance $2,500. Supplies $5,400. Depreciation on buildings $6,500. Interest $5,250. Taxes $3,920.

What was the net profit?

4. During the year 19—, the Morton Trading Company’s books showed:

Net sales amounting to $265,000. Purchases were $148,000, of which $7,540 worth of goods were returned. The cost of goods sold was 60% of the net sales and the final inventory was $84,900. Sales salaries $29,760. Advertising $30,000. Shipping expenses $4,680. Office salaries $10,260. Rent $4,800. Insurance $1,500. Depreciation of plant $6,890. Supplies $1,230. Taxes $4,430.

Prepare a statement of profit and loss for the year.

VI 1. The books of Alfred Gristede show the following record at the close of business September 30, 19—:

Inventory September 1, 19—, $500,000. Purchases $2,500,000. Purchases returns $50,000. Sales $3,250,000. Sales returns $100,000.

If the gross profit is $850,000, what is the final inventory?

2. The profit and loss records of A. C. Dye for the year 19— show the following figures:

Merchandise January 1, 19—, $235,960. Sales $875,900. Sales returns $6,900. Purchases net $586,900. Advertising $16,000. Office salaries $22,500. Sales salaries $34,800. Insurance $6,300. Taxes $21,700. Depreciation on buildings $4,630; on motor fleet $1,875. Accounts written off as uncollectible $36,875. Interest on notes and accounts receivable $6,790. Interest on notes payable $3,275.

At the end of the year the merchandise amounted to $216,735. Draw up the statement of profit and loss for the year.

3. Prepare a formal profit and loss statement of the Lincoln Leather Company for the year ending December 31, 19—, from the data below taken from the company’s books:

Sales $1,559,087. Sales returns $13,456. Merchandise on hand January 1, 19—, $487,693.

Leather bought during the year $876,019, of which there were returns because of defects amounting to $8,716.

Inventory on December 31, 19— disclosed $513,860 worth of goods on hand.

Expenses of operation were: Advertising $247,920. Sales salaries $143,560. Sales commissions $88,723. Sales traveling expenses $6,423. Freight-out $1,976. Delivery expenses $38,976. Rent $38,500. Taxes $12,890. Insurance $7,680. Light $4,320. Heat $15,648. Interest paid $3,216. Interest received $4,872. Office salaries $27,875. Sundry expenses $9,213.

4. The Interurban Railway Company whose comparative balance sheet was the basis of work in Assignment IV, Problem 1, had the following particulars for its statement of profit and loss for the year ending December 31, 19—:

Operating revenue, i.e., income received from sale of service to community, $152,228.11. Other income $1,191.83. Operating expenses $100,582.96. Deductions from income were: Interest on 5% first mortgage bonds $8,750. Interest on notes payable $4,727.41. Taxes $10,578.57.

What was the amount of the net profits for the year?

Compare this with the surplus change as developed by the comparative balance sheet in Assignment IV, Problem 1.

5. Draw up a comparative profit and loss statement of the Interurban Railway Company for the years ended December 31, 19— and December 31 of the previous year from the information submitted in Problem 4 and the following data for the year ended December 31 of the previous year:

Operating revenues $181,016.11. Other income $526.52. Operating expenses $122,143.23. Deductions from income: Interest on the first mortgage bonds $8,750. Interest on notes payable $6,030. Taxes $13,634.59.

VII

1. The financial condition of the Subway Seller at the beginning of the year is shown by the following balance sheet:

THE SUBWAY SELLER BALANCE SHEET January 1, 19—

Assets CURRENT ASSETS: Cash $100,000.00 Notes Receivable 15,000.00 Accounts Receivable 225,000.00 Merchandise Inventory 450,000.00 Liberty Bonds 50,000.00 $840,000.00 ----------- DEFERRED CHARGES: Prepaid Insurance $ 25,000.00 Supplies Inventory 20,000.00 45,000.00 ----------- FIXED ASSETS: Furniture and Fixtures $ 30,000.00 Delivery Equipment 18,000.00 Buildings 350,000.00 Land 200,000.00 598,000.00 $1,483,000.00 ------------ -----------

Liabilities CURRENT LIABILITIES: Notes Payable $300,000.00 Accounts Payable 20,000.00 Accrued Expenses: Salaries 12,000.00 Taxes 25,000.00 Interest on Mortgage 10,500.00 $367,500.00 ----------- Fixed Liabilities: Mortgage on Land and Bldg 350,000.00 717,500.00 ----------- -------------

Net Worth Represented by: Capital Stock $500,000.00 Surplus 265,500.00 $ 765,500.00 =========== =============

At the end of the year the following facts are taken from the books of account:

The profit and loss records show: Sales $2,125,000. Sales returns and allowances $15,000. Purchases for the year $1,200,000. In-freight $15,000. Purchase returns and allowances $8,000. Advertising $125,000. Sales salaries $190,000. Delivery expense $50,000. Depreciation on furniture and fixtures $3,000, and on delivery equipment $2,250. Superintendence $50,000. Clerical salaries $75,000. Repairs and maintenance $20,000. Supplies $30,000. Insurance $60,000. Telephone and telegraph $10,000. Bad debts $10,625. Depreciation on building $14,000. Taxes $30,000. Interest on notes payable $15,000. Interest on the mortgage $21,000. Sales discounts $15,000. Interest received on Liberty bonds $2,000. Purchase discounts $24,000.

The balance sheet records show: Cash $141,000. Notes receivable $15,000. Accounts receivable $335,000. A reserve for doubtful accounts of $10,625. Merchandise inventory $350,000. Prepaid insurance $15,000. Supplies inventory $30,000. Furniture and fixtures $27,000. Delivery equipment $15,750. Building $336,000. Notes payable $300,000. Accounts payable $25,000. Accrued sales salaries $15,000. Accrued taxes $30,000. Accrued interest on mortgage $10,500. Mortgage on land and building $250,000.

Other figures on the balance sheet of January 1, 19— have remained unchanged excepting surplus, the amount of which you are required to determine.

From the above information: (a) Prepare a comparative balance sheet. (b) Prepare a statement of profit and loss. (c) Determine the following ratios: 1. Current assets to current liabilities 2. Working capital turnover 3. Merchandise turnover 4. Accounts receivable to sales (Assume a normal credit period of 60 days) 5. Net profit to net worth 6. Gross profit to net sales 7. Selling expenses to net sales 8. Net operating expenses to net sales 9. Net profit to net sales

2. From the following particulars taken from the books of the United Steel Company, prepare a pro forma balance sheet, and a statement of profit and loss:

Stocks of goods on hand from preceding year $4,964,792. Purchases $12,945,983. Sales $14,987,653. Sales salaries $52,500. Sales traveling expenses $8,613. Sales commissions $1,780. Cash $1,420,909. Executive salaries $32,500. Interest on notes payable $18,604. Rentals $17,000. Capital stock outstanding $38,669,600. Interest income including the accrued, $29,911. Real estate, plant, and equipment $34,469,867. Trade debtors $7,082,026. Notes receivable $302,638. Customers’ acceptances unmatured $4,446,000. Trade creditors $1,609,101. Notes payable $250,000. Repairs to plant $8,790. Investments in subsidiary companies $3,358,933. Advertising cost to date $35,680, exclusive of the amount prepaid. Telegraph $2,514. Telephone $8,716. Freight-out $4,978. Demurrage $1,972. Taxes expense $39,447, of which $17,017 is unpaid. Surplus without taking account of the current year’s profit is $13,678,362. Goods now on hand $7,004,339. Interest accrued on notes receivable $5,510. Prepaid advertising $11,892.

Note: Show Interest Income Accrued as a current asset. 3. The warehouse of the Eastern Distributing Company is destroyed by fire. The records at the main offices showed that there were $785,960 worth of merchandise in the building on January 1, 19—.

The fire occurred on October 3, 19—, and to that date purchases had been made amounting to $2,486,475, of which $18,920 were not yet delivered. Included in the cost of purchases is $22,500 for freight paid.

Sales had amounted to $2,930,760. Statistical records for the ten years previous to the loss, showed a gross profit on sales of 51.42%.

The loss is complete except as to a small amount of goods salvaged, the realizable value of which is estimated at $125,000.

It is necessary, according to the terms of the fire insurance policy, to file an immediate claim for goods destroyed. Prepare such a claim, having due regard to a form suitable for showing the loss.

VIII 1. Draw up from your own data the balance sheet of a corporation, with at least twelve assets and at least five liabilities and a total asset figure of over $250,000.

2. Making your own assumptions set up a balance sheet for the succeeding year and a comparative balance sheet for the two years.

3. Determine the ratios of fixed assets to capital stock, of working capital to net worth, and of current assets to current liabilities.

4. Write a brief statement of about 150 words giving your opinion of the financial condition of the concern.

IX 1. Enter in ledger “T” accounts the information for the “end of the year” given in Assignment VII, Problem 1, page 525.

2. Using the account titles in the ledger of Problem 1, draw up a chart of accounts similar to Form 2, page 75.

3. Show and explain how the ledger of Problem 1 is the proprietorship equation.

4. Draw up a profit and loss statement to account for the change in proprietorship shown by Assignment VIII, Problem 2, making your own assumptions as to items in the various sections of the statement.

5. State the probable business transactions occurring to bring about these changes in proprietorship (Problem 4), i.e., show the interaction of the profit and loss elements with the asset and liability elements in causing the changes in financial condition.

Instructions

Problem 1. A ledger “T” account is a skeleton account ruled only with the horizontal “title” line and the vertical line separating the left section from the right, date and amount columns being left without formal ruling.

Problem 3. The illustration on page 41 gives the form to follow in solving this problem.

Problems 4 and 5. Make your assumptions reasonable as to the turnover and the ratios of expenses and profit to sales. Assume a merchandise turnover of 5, and a gross profit of 40% of sales. From these determine roughly the cost of goods sold, the purchases, and the sales figures. Make reasonable provision for bad debts, depreciation, interest, etc., in accordance with the balance sheet requirements. Make the other expense items whatever amounts are necessary to produce the same net profits as is shown by the comparative balance sheet.

Follow closely the illustration in Chapter VII for the form of solution to be used for Problem 5.

X 1. Using the schedule shown on page 82, write out three examples of each class and show their effects in each of the three opposite classes (27 examples).

2. Set up ledger “T” accounts for each of the illustrations on pages 82-84, entering therein the proper amounts, debit and credit.

XI 1. (a) Analyze the following transactions from the seller’s viewpoint and name the debit and credit elements of each to show: 1. The increase or decrease of assets, liabilities, and proprietorship. 2. The account titles under each of the general groups.

The Dairymen’s League on August 1, 19— owed the Union Car Line Company $19,780 for transportation services rendered, and paid $9,780 cash on account, and gave a 60-day note (6%) for $5,000.

Services to the League for the week ending August 7 totaled $2,920.

A claim of $720 was allowed the League on the 12th for goodslost in transit.

The bill of August 7 was paid in full August 14, less 5% for prompt payment.

On the 15th the note for $5,000 was discounted at the bank at 6%.

(b) Set up the Dairymen’s League account on the books of the Union Car Line Company.

2. (a) Analyze the following transactions of Samuel Lawson and name the debit and credit elements of each to show: 1. The increase or decrease of assets, liabilities, and proprietorship. 2. The account titles under each of the general groups.

On September 5, 19—, Lawson entered a claim for $1,000 against the Mohawk and Westchester Railroad Company for goods bought but lost in transit on August 12.

September 16 one of Lawson’s trucks was destroyed by fire and a claim was entered against the Shippers Fire Insurance Company for $5,800. The truck was new and cost $7,500.

September 20 a bill for $23,400 for services was received from the Union Transport Company.

Payment of $16,900 was made September 23 to the Transport Company.

September 30 the claim of September 5 was paid in cash by the M. and W. R. R. Company to Lawson, and he paid by check the balance due the Transport Company.

(b) Set up the Union Transport Company account on the books of Samuel Lawson.

3. (a) From the data of Problem 1, set up the Union Car Line Company account on the books of the Dairymen’s League.

(b) From the data of Problem 2, set up the Samuel Lawson account on the Union Transport Company books.

4. (a) Analyze the following transactions from the viewpoint of the business and name the debit and credit elements of each to show: 1. The increase or decrease of assets, liabilities, and proprietorship. 2. The account titles under each of the general groups.

Balance of cash on hand July 1, 19—, $8,940. July 2, received from cash sales over the counter $760. July 3, received from customers in payment of notes $575.

July 5, paid for salaries $175, motor repairs $85, advertising $325, postage $22. July 6, discounted $1,000 6% 30-day note at the bank. July 7: Paid for new Ford truck $925, f.o.b. Detroit, and freight-in on truck, $38.75; insurance $75. Paid creditors $4,290. Made a promissory note in favor of a creditor for $500 for three months at 6%. Paid note for $2,000 due on the 8th of July with interest at 6% for three months. Bought a Liberty bond for $887.50 with accrued interest of $16.50.

(b) Set up the Cash account. (c) Show the account properly ruled and balanced.

5. Name the debits and credits for each of the following transactions and set up the Notes Payable account:

On October 1, 19—, discounted 30-day 6% note for $2,500 at the bank. Paid six months’ promissory note at 6% for $1,000 on the 10th and gave to a trade creditor our note for $3,750 due in 30 days without interest for balance of open account. Discounted trade customer’s three months’ 6% note for $5,000 at bank on the 15th, the discount period being 60 days. Paid note for $2,500 at the bank on the 31st.

6. The Willow Spring Dairy Farm purchased a new Cleveland Tractor April 1 for $1,850, f.o.b. Cleveland. Freight charges were $32.90; insurance in transit $15; hauling the accessories from the station to the farm $12; attachments cost $435; and assembling the parts cost $35. After being used for six months the machine with accessories was sold for $2,000.

Set up the Farm Implements account and determine the profit or loss. Disregard depreciation.

7. On January 15 a tract of land was purchased for $32,000, which amount included the cost of searching title $800, and unpaid taxes at time of purchase $350. The cash paid included all but the taxes.

On March 1 a new road was completed through the tract at a cost of $1,250. April 1 the unpaid taxes of $350 were paid. August 1 assessments were levied for the state highway amounting to $3,280. Half of the land was sold, December 10, for $18,500.

Name the debits and credits of each of these transactions and set up the Land account.

Instructions

Problems 1, 2, and 4. Set up each item somewhat in the following manner:

Paid $9,780 cash on account (Dairymen’s League paid to Union Car Line Company).

Debit: Increase of Assets (Cash, $9,780). Credit: Decrease of Assets (Accounts Receivable, Dairymen’s League $9,780).

XII 1. (a) Analyze the following transactions and name the debit and credit elements of each to show: 1. The increase or decrease of assets, liabilities, and proprietorship. 2. The account titles under each of the general groups. [Refer to (b) for account titles to be used for this.]

Paid, March 1, repairs on auto truck $62.50; by check, rent $100. March 4, $18 for office supplies; advertising circulars $128; postage $25; telephone $18.50. March 8, interest on borrowed money $12; new sign on door $22. March 15, received interest on Liberty bonds $21.25. March 18, typewriter repairs cost $8; gasoline and oil $57; wrapping paper and general supplies $20. March 25, advertising $75; electric light $17; insurance $15. March 31, salaries of manager $125; office force $100; telegrams $12.80; discount on borrowed money $5; coal $50; sales salaries $75; traveling expenses $14.

(b) Prepare accounts with: 1. Delivery Expense 2. Advertising 3. Interest Cost 4. Interest Income 5. General Office Expense 6. Postage, Telephone, and Telegraph 7. Selling Expense 8. Cash

and set up the debits and credits of the transactions therein. All transactionsa re for cash.

Be careful always to maintain the debit and credit equilibrium.

2. Prepare accounts with Delivery Expense, Delivery Supplies, Delivery Wages, and Cash, and set up therein the debits and credits of the following transactions, all of which are for cash:

November 1, paid $5.40 for gasoline and $1.20 for oil. November 6, bought a new inner tube for $3.50, and the following day a new shoe for $42.50. November 10: Paid $4.50 for gasoline, and $1.20 for oil. Paid the driver $35 for wages and $22.50 to the helper. Removing carbon cost $2 and patching a tire $.50. November 15, the car was repaired for $75. November 18: A short-term insurance policy for $25 was taken. Paid the driver $35 for wages, and $22.50 to the helper. The driver was arrested and fined $10 for passing a trolley car while it was discharging passengers. November 19, the car was wrecked by going down a washed-out embankment and the helper hurt. Hospital expenses were $50, which the Casualty Insurance Company paid on the 25th. It cost $60 to take the car to a garage and repairs cost $275. Suit was entered against the township for costs.

3. (a) Analyze the following transactions and name the debit and credit elements of each to show:

1. The increase or decrease of assets, liabilities, and proprietorship. 2. The account titles under each of the general groups.

R. C. Rockwell goes into the wholesale grocery business and invests $20,000 in capital. Due to a need for cash to take advantage of a favorable purchase of securities for personal use, he withdraws $5,000 cash. He sells some of his personal securities for $500 to buy merchandise for the store. He pays out of business funds household expenses of $400, and a personal note due on his touring car for $500. By selling two acres of land for $500 he returns the $500 he paid on the car. At the end of the month he transfers to his capital account $1,000, being the debit balance in his personal account.

(b) Set up the proprietor’s capital account as carried on the books of the grocery business.

4. (a) Analyze the following transactions and name the debit and credit elements of each to show:

1. The increase or decrease of assets, liabilities, and proprietorship. 2. The account titles under each of the general groups.

There is a credit balance in Profit and Loss of $4,000. A debit balance in George B. Kelly, Personal, of $1,500. A credit balance in George B. Kelly, Capital, of $35,000. A debit balance in Cash of $5,000. Mr. Kelly paid bills for the business out of personal funds: Heat and electric light $75.60. Water rent $25. Store rent $400. Gas bill $26.50. R. G. Dun rating dues $10. Trade association dues $15.

He received personally and retained the following amounts due the business: Interest on notes receivable $375. Cash in settlement of last month’s disputed electric light bill $15. Rent of desk room $150. Mr. Kelly withdrew $400 cash for personal use. He paid for telegrams for the business $15. He had his touring car repaired and took $75 store cash to pay for it.

(b) Prepare accounts with: 1. Profit and Loss 2. George B. Kelly, Personal 3. George B. Kelly, Capital 4. Cash

and set up the debits and credits therein.

Transfer the net balance of Profit and Loss account to Kelly, Personal; and transfer the net balance of the latter account to Kelly, Capital.

XIII

1. Analyze the following transactions and name the debit and credit elements of each to show:

1. The increase or decrease of assets, liabilities, and proprietorship. 2. The account titles under each of the general groups.

Credit sales to customers $389,650. Sales returns $9,480. Inventory at beginning of year $62,780. Credit purchases $206,240. Purchase returns $4,760. Cash received from customers $250,000. Sales discounts allowed $1,280. Purchase discounts taken $3,560. Cash paid creditors $175,000. Freight-in $2,670, and freight-out $3,935, were paid in cash.

2. Bought a motor truck for $2,250, on which the freight charges were $40 in addition. Accessories cost $150 and of these the speedometer was later sold for $50, its cost price. Set up the Delivery Truck account and show it properly adjusted at the close of the period to take account of 10% depreciation.

3. An old building cost $10,000.

Renovation with betterments $1,200. Assessments for paving the street were $750. An extension not joined to the main building cost $2,000. The extension was sold for $2,500 cash early in the second year. Loss by fire at the end of the third year amounted to $3,000, which the insurance company made good by repairing the damage. Depreciation at 5% per annum is calculated on the balance of the Building account at the end of each year.

Show the Building account and its depreciation reserve at the end of the fifth year.

4. The Office Supplies account shows $450, of which $400 is still on hand at the end of the period. Show the account properly adjusted and closed.

5. From the data of Problem 1, prepare a single Merchandise account. Assume a final inventory of $75,000, and show the account adjusted and closed.

6. Analyze the following transactions relating to a business plant, and name the debit and credit elements of each to show: 1. The increase or decrease of assets, liabilities, and proprietorship. 2. The account titles under each of the general groups.

Purchased a building for $100,000 from James Jackson & Co. Paid James Jackson & Co. $40,000 cash and executed a mortgage for the balance. Installed a new heating plant at a cost of $15,000 cash, $1,000 cash being received from sale of old plant. A new roof, at a cost of $5,000 cash, was put on. The old roof had no value as scrap. One year later the entire heating plant was covered with asbestos to conserve fuel. The cost was $500 cash. The roof was repainted at a cost of $100 cash. Glass broken by a hail storm was replaced at a cost of $50 cash. Two new skylights costing $750 cash were built. Gutters and down-spouts were replaced at a cost of $150.

XIV 1. Allowing five lines for each account and for the necessary depreciation reserve accounts which should follow immediately their particular assets, set up the following accounts on the ledger in proper form and under correct titles, and take a trial balance as of December 31, 19—.

C. M. Loomis, capital investment $50,000. Withdrawals $3,000. Initial inventory of merchandise $19,740. Purchases $63,800; returns $1,524.50. Sales $99,360; returns $1,480. Cash in bank $2,750. Office equipment $800. Delivery trucks $5,000. Accounts receivable $40,950. Notes receivable $5,000. Liberty bonds $5,000. Notes payable $1,700. Interest and discount $90, Dr. Supplies $600. Salesmen’s salaries $3,500. Advertising $1,200. Delivery expenses $569.50. Office salaries $4,655. Legal advice $50. Light and heat $150. Insurance $75. Building $22,910. Taxes $245. Land $2,500. Mortgage $10,000. Accounts payable $18,980. Depreciation incurred during previous years on buildings $2,000; on delivery equipment $500.

2. Loomis’ final merchandise inventory is $20,680. He estimates depreciation on buildings at 5%, and on delivery equipment at 10%. 5% of the outstanding accounts and notes are deemed uncollectible. Office equipment is to be written down $300. Unexpired insurance is $25; accrued mortgage interest $300; accrued taxes $250; accrued sales salaries $350; and supplies on hand $200.

Prepare a statement of profit and loss and a balance sheet.

XV

1. Give three examples each of deferred expense and income, and accrued expense and income (12 examples). Show these in account form after the account has been adjusted.

2. From the following particulars, take a trial balance of the ledger of the Builders’ Supply Co. on June 30, 19—.

Warehouse $ 22,500.00 Land 7,800.00 Capital Stock 300,000.00 Surplus 50,193.00 Stock-in-Trade 245,680.00 Furniture and Fixtures 2,500.00 Good-Will 25,000.00 Trade Debtors 362,400.00 Cash 38,490.00 Trade Creditors 176,700.00 Notes Payable 15,700.00 Notes Receivable 18,900.00 Sales 589,760.00 Purchases 356,420.00 Salaries 38,900.00 Coal 4,200.00 Repairs 2,800.00 General Expenses 17,900.00 Depreciation Reserve Warehouse 5,000.00 Mortgage Payable 10,000.00 Interest Expense 475.00 Interest Income 662.00 Lighting 700.00 Telephone 600.00 Insurance 1,860.00 Taxes 890.00

Draw up a balance sheet and profit and loss statement for the year, taking consideration of these additional data:

The merchandise on hand is $256,920. Coal on hand $500. Accrued mortgage interest $600. The warehouse has depreciated 5%, and furnitures and fixtures 10%. 3% of the Trade Debtors balance is deemed uncollectible.

Note: Do not classify expenses in the profit and loss statement. List them under the two titles, Operating Expenses and Non-Operating Expenses.

3. (a) Using the trial balance data of Problem 2, set up the ledger of the Builders’ Supply Co. (b) Close the ledger in accordance with the data given. (c) Take a trial balance of the ledger after it is closed.

XVI 1. The following transactions are to be set up, debit and credit, on the ledger. Use the transaction number as the date of the month of June. Set upon your ledger the following account titles, in the order given, allotting to each the number of lines indicated by the numeral following the title:

Cash 35 Notes Receivable 10 C. H. Scovil 10 M. K. Dorns 10 A. B. Sutton 10 J. P. Nevin 10 B. T. Stanton 10 C. J. Moger 10 R. B. Karell 10 Reserve for Doubtful Accounts 10 Merchandise Inventory 10 Furniture and Fixtures 10 Depreciation Reserve Furniture and Fixtures 10 Notes Payable 10 Crew Brothers & Co. 10 Morris, Lee & Co. 10 Bondell & Co. 10 R. Kennedy 10 C. H. Wyss, Capital 10 C. H. Wyss, Personal 10 Profit and Loss 15 Sales 25 Sales Returns and Allowances 10 Purchases 15 Purchase Returns and Allowances 10 Freight-In 10 Salaries 10 General Expense 15 Depreciation 10 Bad Debts 10 Expense Supplies 10 Interest Income 10 Interest Expense 10 Purchase Discount 10

June 1. C. H. Wyss invested $10,000 cash. He paid $5,000 cash for merchandise; and $200 for one month’s rent of a storeroom. Bought for cash, furniture and fixtures $1,000. 2. Bought merchandise, $2,750 of Crew Brothers & Co. on account. Sold merchandise for cash $675. 3. Sold merchandise for cash $1,345. Paid for office supplies $35.75. 4. Sold C. H. Scovil $500 of merchandise, receiving $200 cash. 5. Bought office safe for $150; and typewriter for $65. 6. Bought merchandise of Morris, Lee & Co. $957.80, paying $257.80 cash. Gave Crew Brothers & Co. our 6% 30-day note for $1,000. Wyss took merchandise for his own use, $50. 8. Cash sales were $1,585. Advertising cost $275. 9. Paid salesman $22; and office clerk $18; and $24 for coal. 10. Bought merchandise for cash $480. 11. Sold R. B. Karell merchandise for $90, and took his check in payment. 12. Paid $25 for Merchant Association dues; postage and stationery $15. 13. Sold bill of merchandise $358.90 to M. K. Dorns, receiving $158.90 in cash and accepting from Dorns, at its face value, R. C. Home’s note, non-interest-bearing, for $50, due in 10 days. 14. Gave Crew Brothers & Co. a 10-day 6% note for balance due. Dorns returned as unsatisfactory $10 worth of merchandise sold to him on the 13th.

XVII 1. The following transactions of C. H. Wyss are to be set up on the ledger in the same manner as those given in the practice data of Assignment XVI.

June 16. Cash sales were $875.55. Paid salesman $22; and office clerk $18. 17. Paid freightbill of $35; and express $5.80. 18. Wyss drew for personal use $400 cash. Paid electric light bill of $18.90. 19. Bought on account 2/10, net 20, merchandise from Bondell & Co. for $5,600. 20. Cash sales were $925.50. Sales on account to A. B. Sutton $1,275; J. P. Nevin, $150; C. J. Moger $99.70; and R. B. Karell $285.90. 22. Returned merchandise $400 to Bondell as unsatisfactory. 23. Paid salesman $22; and office clerk $18. 24. Received payment of R. C. Home’s note for $50. Was allowed by Bondell & Co. $50 on claim. 25. Paid Crew Brothers & Co. note in their favor, with interest at 6%. C. H. Scovil paid $100 on account. 26. Paid freight $38.50. Wyss took goods for his own use $45. Sold B. T. Stanton $175 merchandise, receiving $50 cash and James Harvey’s note for $100 at 6% for 60 days, accepted at face value. 27. Paid telephone bill $13.90; advertising $52; and circulars $10. Allowed C. J. Moger’s claim for $10 for spoiled goods. Paid Bondell & Co. amount due. 29. Cash sales were $470. Wyss drew for private needs $200. Collections were: A. B. Sutton $275; J. P. Nevin $150; C. J. Moger $59.70; and R. B. Karell $185.90. 30. Paid Morris, Lee & Co. $500 on account. Paid salesman $22; office clerk $18. Cash sales were $950. Purchased from R. Kennedy a desk for store use valued at $75, Kennedy taking merchandise to the value of $50 in part payment and the balance being credited.

Instructions

Note that the Bondell & Co. bill was paid within the discount period. (2/10, net 20, means that 2% can be deducted from the amount due if it is paid within 10 days and that the face amount of the bill is due in 20 days from date of rendering.)

XVIII 1. Take a trial balance of C. H. Wyss’ ledger completed in Assignment XVII and record it on a piece of journal paper.

Draw up a balance sheet and profit and loss statement for the end of the month, taking account of the following adjustments:

Interest accrued on notes receivable $.67. $49.53 worth of accounts and notes receivable will probably prove to be bad. Set up a reserve on the balance sheet. Inventories on hand: merchandise $7,218.20; expense supplies $25.75. Depreciation of $11.45 on furniture and fixtures for the month. Interest accrued on notes payable $4. Salaries accrued $5.71

2. The following transactions are to be entered in a purchase journal. Make daily postings to vendor accounts and a summary posting at the end of the month to Purchases account.

April 2. Bought from Endicott-Johnson Company, 61 Hudson St., N.Y.C.: 20 pairs men’s bluchers, black @ $ 4.75 36 pairs ladies’ single strap pumps, patent leather @ 3.50 10 pairs men’s white buckskin @ 2.50

10. Bought from Lounsbury-Soule Company, 47 Duane St., N.Y.C.: 25 pairs men’s Scotch brogues @ $ 6.00 8 pairs men’s kangaroo bluchers @ 4.50

15. Bought from Lexington Shoe Company, 141 Duane St., N.Y.C.: 20 pairs men’s sport oxfords @ $ 4.00 15 pairs women’s sport oxfords @ 3.75

20. Bought from Charles A. Eaton, 127 Duane St., N.Y.C.: 12 pairs women’s two strap oxfords, black @ $ 2.50 6 pairs women’s pumps, black kid @ 1.75 8 pairs women’s two strap sandals, white @ 2.65

26. Bought from I. Miller, 560 Fifth Avenue, N.Y.C.: 5 pairs Russian boots @ $10.00 12 pairs riding boots @ 12.00 16 pairs single strap suede pumps @ 6.00

3. Enter the following transactions in a purchase journal ruled for two departments—Prescription and General. Make daily postings to vendor accounts. Summarize and post at end of month.

May 1. Bought from Park Davis & Co., Detroit, Mich.: For Prescription Dept. Invoice #10 2/20, n/60 $650.00 For General Dept. Invoice #11 2/20, n/60 425.00 3. Bought from Lehn & Fink, Inc., 635 Greenwich St., N. Y. C.: For Prescription Invoice #61 1/20, n/30 $150.00 For General Invoice #62 1/20, n/30 87.50 7. Bought from Eastman Kodak Co., Rochester, N.Y.: General Invoice #675 1/30, n/60 $126.50 13. Bought from Park & Tilford, New York City: General Invoice #256 1/10, n/30 $ 22.50 From McKesson & Robbins, 91 Fulton St., N.Y.C.: Prescription Invoice #27 2/20, n/60 $ 75.00 17. Bought from Hospital Specialty Co., New York City: General Invoice #27 1/30, n/60 $ 76.00 Prescription Invoice #28 1/30, n/60 98.00 23. Bought from Crescent Drug Sundry Co., Philadelphia, Pa.: General Invoice #75 1/30, n/60 $135.00 29. Bought from Marcus & Smith, New York City: General Invoice #861 1/10, n/30 $ 65.00 From J. M. Dalton, New York City: General Invoice #10,680 n/30 $ 16.00 31. Bought from Denver Pharmaceutical Co., Denver, Colo.: Prescription Invoice #16 1/20, n/60 $165.00 From United Drug Exchange, New York City: Prescription Invoice #205 1/30, n/60 $267.00

Instructions

Problem 1. Do not close the accounts in the ledger. Make up the statements from the trial balance figures and the adjustment data given.

Problem 2. Use two-column journal paper—the inner column for detail and the outer column for totals. Follow Form 7 shown on page 142. Use plain paper with “T” accounts for the ledger.

Problem 3. Use three-column journal paper. Rule in additional lines to make it conform with Form 9 on page 144. Follow carefully the illustration on that page in making the entries. Use plain paper with “T” accounts for the ledger.

XIX 1. Close C. H. Wyss’ ledger, taking account of the adjustments mentioned in Assignment XVIII. Use the profit and loss statement already drawn up to show the order in which the accounts should be closed.

Take a post-closing trial balance, recording it on a piece of journal paper, and compare it with the balance sheet.

2. The following transactions are to be entered in a sales journal. Make daily postings to customers’ accounts and a summary posting at the end of the month to Sales account.

April 3. Sold on account to Mrs. A. K. Foster: 3 waists @ $1.50; 1 suit $45; and 6 pairs hosiery @ $1.10. Cash sales were $175. 7. Sold on account to Mrs. R. F. Burns: 1 evening dress $75; 1 evening cloak $125; 3 pairs hosiery @ $3.30.

To Mrs. B. J. Scott: 1 riding habit $65; 1 pair riding boots $20; 1 riding crop $7.50; 1 riding hat $12. Cash sales were $225. 15. Sold to Miss Alice Hanna, on account: 1 pair 18-button gloves $7.50; 1 evening dress $45; 1 pair cut-steel buckles $25; 1 pair evening slippers $16. Cash sales $376. 21. Sold to Mrs. W. S. Jordan, on account: 1 evening dress $97.50; 1 afternoon dress $72.50; 1 business suit $45; 1 pair sandals $8.50; 1 pair evening slippers $16; four pair hosiery $20. Cash sales $413. 28. Sold to Mrs. Franklin Perry, on account: 1 bathing suit $13.50; 1 pair hose $1.50; 1 pair bathing shoes $2.50; 1 rubber cap $1.75. Cash sales, $365.

3. The following transactions are to be entered in a sales journal ruled for two departments—Prescription and General. Make daily postings to customers’ accounts. Summarize and post at end of month.

May 2. Sold to Alhambra Pharmacy, Invoice #325, 1/30, n/60: Prescription, $325; General $215. To Alpha Drug Co., Invoice #326, 1/30, n/60: General $165. Cash sales: Prescription $614; General $528.90. 6. Sold to Ambassador Pharmacy, Invoice #350, 1/20, n/30: Prescription, $235; General $129. To Anglo-American Drug Co., Invoice #352, 1/10, n/30: Prescription $12; General $137.25. Cash sales: Prescription $562; General $489. 10. Sold to Arcade Drug Store, Invoice #375, 1/20, n/30: Prescription $27; General $439. Cash sales: Prescription $281; General $314. 18. Sold to Boston Pharmacy, Invoice #401, 1/30, n/60: Prescription $426; General $237. To Boyer-Gordon Drug Co., Invoice #402, 1/30, n/60: Prescription $374; General $472. Cash sales: Prescription $489; General $654. 24. Sold to Bronx Pharmacy, Invoice #431, 1/30, n/60: Prescription $256; General $416. Cash sales: Prescription $617; General $529. 28. Sold to Terminal Drug Co., Invoice #465, 1/20, n/30: Prescription $10; General $438. Cash sales: Prescription $675; General $981.

Instructions

Problem 2. Use two-column journal paper—the inner column for detail and the outer column for totals. Follow Form 7 shown on page 142. Use plain paper with “T” accounts for the ledger.

Problem 3. Use three-column journal paper. Rule in additional lines to make it conform with Figure 9 on page 144. Follow carefully the illustration on that page in making the entries. Use plain paper with “T” accounts for the ledger.

XX 1. The following transactions are to be entered in a cash receipts journal and posted, where necessary, to ledger accounts. At the end of the week summarize and post to a Cash account. Follow the illustration on page 148.

May 1. A. K. Foster, on account $56.10; S. C. Kramer $66.25. Cash sales $316. 2. Miss Alice Hanna, on account $93.50; W. S. Jordan $259.50. Cash sales $425. 3. Cash sales $543. 5. C. A. De Forest paid his note for $1,000, due today, with interest $15. Mrs. Irene Brush paid on account $235. Cash sales were $276. 6. Mrs. Lena Dupont paid on account $67.25. E. F. Gibbs paid on account $100. Cash sales were $347.75. 7. James W. Law, on account of his non-interest-bearing note $126.75. Mrs. Molly Lee, on account $257.25. E. D. Wynne, for commission on goods sold for him, $25. Cash sales $482.

2. Enter the following transactions in a cash disbursements journal and post daily to “T” ledger accounts set up on plain paper. Follow the form of journal shown on page 149. Post total disbursements for the week to the ledger Cash account used in Problem 1.

May 1. Paid Acme Cloak & Suit Co., on account $235; American Cloak Co. $165. Bought postage stamps and stamped envelopes $50. 2. Paid Green & Greenberger on account $175. Bought office stationery $51.75. Paid Ideal Cord & Trimming Co. on account $45. 3. Paid Lakeview Garment Co. on account $127.50; Lang Trimming Co. on account $25. Paid salesmen’s salaries $225. 5. Paid Empire Dress & Suit Co. on account $137. Paid telephone bill for April $30.14. Paid Elmer Cloak & Suit Co. $75. Our note #25 for $1,000 came due and was paid with interest $10. 6. Paid electric light bill for April $27.50. Paid rent May 15 to June 15, $263. Paid Standard Novelty Works on account $115. 7. Paid Magic Cloak & Suit Co. on account $67.50; Textile Trimming. Works on account $75. Paid office salaries $100.

3. The following transactions are to be entered in a cash book, cash receipts and cash disbursements bound together. Post daily to “T” ledger accounts set up on plain paper. Follow Forms 10 and 11 shown on pages 148-149. Post total receipts and total disbursements for the week to the ledger Cash account used in Problem 1.

May 8. Balance from previous week’s transactions, $1,691.96. Paid Green & Greenberger on account $135; American Cloak Co. $45. Received on account from Miss Frances Clyne $102; and Miss Lula Fields $178. Cash purchases were $340.25. 9. Paid Acme Cloak & Suit Co. $165; Lakeview Garment Co. $135. Received on account from Miss Louise Fox $215; and Miss Alice Gaynor $176. Cash sales were $189. 10. Paid salesmen’s salaries $230; for delivery service $150. Received on account from Miss Katherine Kennedy $216; and Mrs. Johanna Lambert $75. Received rent from portion of store $50. 12. Paid Empire Dress & Suit Co. on account $150; Elmer Cloak & Suit Co. $125. Paid freight on purchases $41.37. Received on account from Miss Pauline Marks $167.50. Cash sales $576. 13. Paid telephone bill, $27; advertising bill for newspaper insertions $75. Received on account from Mrs. D. J. McCormack $167. Received payment of note of J. I. Ardsley $500, and interest $7.50. 14. Paid Daisy Cloak & Suit Co. $150 on account. Paid office salaries $100. Received from Miss Sue Robertson $125. Proprietor, M. D. James, drew for personal use $50. Cash was short $4.87.

4. The following data have been taken from the ledger of the Port Bedford Terminal Company, on December 31, 19—.

Real Estate, Wharves, and Warehouses $30,932,394 Terminal Railway 807,052 Marine Equipment 298,994 Machinery and Electric Plant 177,588 Depreciation Reserve, Real Estate, Wharves, and Warehouses 4,187,074 Terminal Railway Depreciation Reserve 45,817 Marine Equipment Depreciation Reserve 23,942 Machinery and Plant Depreciation Reserve 16,894 Cash in Bank 192,806 Accounts Receivable 451,406 Materials and Supplies Purchases 128,894 Investments in U. S. Liberty Bonds 1,809,000 Capital Stock 15,000,000 First Mortgage 4% Gold Bonds, due August 1, 1951 12,000,000 Accounts Payable 652,644 Notes Payable 247,000 Surplus 1,231,540 Warehouse Income 2,681,694 Income from Piers 2,140,562 Sundry Income 436,353 Maintenance of Property 1,160,453 Selling and Service Costs 1,081,526 General Expenses 462,386 Taxes 681,021 Bond Interest 480,000

(a) Set these items up in the ledger. (b) Take a trial balance.

Instructions

Problem 1. Use plain paper with “T” accounts for the ledger.

Problem 3. Use a double sheet of two-column journal paper for the cash book. On the receipts side enter the balance brought forward in the outer column. For current and summary entry follow carefully the forms shown on pages 148-149.

At the end of the week summarize the cash book and post the totals to the ledger Cash account. Balance and rule the cash book, being careful to carry forward the balance to the next week.

XXI 1. The following transactions should be entered in a general journal, debit and credit, with full explanation.

On November 15, 19—, John Henry and James Raymond form a partnership to carry on a retail grocery business. Losses and gains are to be shared equally. Each partner is to be allowed a salary of $150 per month. Henry invests the following assets from a business of which he has been sole owner: Cash $150; notes receivable $570; accounts receivable $7,320; merchandise $24,360; furniture and fixtures $4,230. The partnership also assumes the following liabilities for Henry: Notes payable $3,000; accounts payable $8,815. Raymond invests these assets: Cash $5,500; furniture and fixtures $2,500; building $17,000.

2. At various times the following transactions of the partnership occur. Record them in the journal with full explanation.

Nov. 20. Returned goods to Austin Nichols & Co. $215; to Bronx Sugar Co. $65; to Continental Food Products Co. $87.50. 22. Received 30-day 6% note of J. D. Jordan for $75. Accepted draft of Armour & Co., 60 days from sight, in favor of the American Live Stock Co., $127.50. 24. Goods sold during previous week were returned by Franklin K. Adams $25; Eugene Alread $35; Preston Freeman $16.50. 26. The partners gave their 90-day 6% note to Swift & Company, payable at the store, for $725. 28. Investigation upon a complaint from James Ortner, a customer, showed that a sale of $150 to George Ortner had been charged to the former in error. Dec. 8. Made Joseph Horowitz, a customer, an allowance of $25 on account of dissatisfaction with a recent purchase. 10. Sold bill of goods $425.50, to Ben. B. Brady, receiving cash $125.50, and J. S. Gordon’s 60-day acceptance for the balance. 20. Purchased a plot of ground for $4,000 from the Bond & Mortgage Co., paying $1,000 cash and executing a mortgage for the balance.

3. The following particulars relating to Problem 4, Assignment XX, must be taken into account to show the true condition of the Port Bedford Terminal Co. as on December 31, 19—:

Materials and supplies on hand $68,894. Depreciation for the period: On real estate, wharves, and warehouses $308,401. On terminal railway $22,581. On marine equipment $16,714. On machinery and electric plant $4,978. Estimate of uncollectible accounts $10,000. Interest accrued on Liberty bonds $21,488. Accrued maintenance of property $25,980. Accrued selling and service costs $16,460. Accrued rents on warehouses $50,000. Accrued rents on piers $30,000. Taxes payable $50,000. Warehouse rents prepaid $20,000.

(a) Draw up a balance sheet for December 31, 19—. (b) Draw up a statement of profit and loss for the twelve months’ period ending December 31, 19—.

Instructions

Problem 3. The net worth section of the balance sheet should be set up as follows:

Capital Stock $........ Surplus: At beginning of period $........ Net profit for period ........ -------- At end of period $ ------ ======

Classify the items of the profit and loss statement on the basis of: 1. Operating income 2. Operating expenses 3. Non-operating income 4. Non-operating expenses

XXII 1. Albert Johnson and Harold Taylor enter into a copartnership agreement for the purpose of buying and selling Christmas novelties. Each contributes cash, no other resources of use to this undertaking being available. Taylor, because of wide acquaintance among manufacturers, is to handle the buying end, and Johnson is to have charge of the details of store management and selling. They are to share profits and losses equally.

On November 15, 19—, operations begin. They keep a full record of all transactions, using a cash book, purchase journal, sales journal, general journal, and ledger. The following accounts are kept:

Cash Notes Receivable M. K. Lord C. H. Marks K. P. Temple L. K. Lewis F. M. Wood T. C. Bailey Merchandise Inventory Furniture and Fixtures Notes Payable Imbrie & Co. Bonbright & Co. Halsey, Stewart & Co. B. W. Chapman & Co. Albert Johnson, Capital Albert Johnson, Personal Harold Taylor, Capital Harold Taylor, Personal Profit and Loss Sales Sales Returns and Allowances Purchases Purchases Returns and Allowances Freight-In Salaries General Expense Expense Supplies Bad Debts Interest Expense Interest Income Purchase Discount

Enter the following transactions in their respective journals:

Nov. 15. Each partner deposits $7,500 in the firm name of Johnson & Taylor at the Park National Bank. Paid $1,000 for furniture and fixtures. Paid rent $250 and advertising $100. Bought merchandise from Imbrie & Co. $2,000, paying $500 cash, giving a note for $1,000, due in 30 days at 6%, and the balance remaining on account. Johnson withdrew $200 in funds for personal use. 16. Cash sales $430.80: on account to F. M. Wood $569.20; K. P. Temple $500. 17. Bought for cash, paper and twine $29.50; miscellaneous supplies $10. 18. Sold merchandise to M. K. Lord for $1,000, accepting his 10-day 6% note for $500 and $300 in cash. Cash sales amounted to $450. 19. Bought a cash register for $150. Cash sales $400. 20. Bought merchandise from Bonbright & Co. for $500, 2/10, n/30. Paid Imbrie & Co. on account $450. Taylor took merchandise $25, for his own use. Cash sales were $800. 22. Cash sales were $300. Sold on account to Lewis $950; and to Marks $350. 23. Paid Bonbright & Co. the bill of the 20th. Paid salaries $40. 24. Sold T. C. Bailey, on account, $450 of merchandise. Johnson took $100 cash for current needs. The firm bought $1,400 merchandise from Halsey, Stewart & Co. 26. Bought of B. W. Chapman & Co., merchandise $250. Cash sales were $450. 27. The firm is notified that C. H. Marks has failed. 29. Sold bill of merchandise of $200 to T. C. Bailey, receiving $100 in cash, and a 6% note for the balance, due in 10 days. Cash sales were $300. 30. Returned $50 merchandise to B. W. Chapman & Co. Paid freight $35; insurance $15. Lord paid note of $500 and interest. Paid $40 in wages and gave Halsey, Stewart & Co. a 10-day 6% note for amount due.

2. Using the adjustment data of Assignment XXI, Problem 3, close the ledger of the Port Bedford Terminal Co. and take a trial balance after closing.

Instructions

Problem 1. The purpose of this assignment is to give practice in the operation of the five journals in a going concern. The ledger will not be used.

Use a double sheet of two-column journal paper for the cash book. A single sheet of two-column paper will be sufficient for each journal.

Make full opening entry on November 15.

Do not summarize the journals until directions are given.

Note that the firm takes advantage of the Bonbright discount offer.

Make no entry as to the Marks’ failure until further instructions.

Problem 2. Transfer the balance of the ledger Profit and Loss account to the Surplus account.

XXIII 1. Continue the following as in Problem 1, Assignment XXII.

Dec. 1. Johnson took $100 for personal use. The firm paid $50 for freight bills. T. C. Bailey returned merchandise $50. 2. Bought supplies for $18.50 cash. Electric light bill $18, and telephone bill $12, were paid. 3. Cash sales were $240. They received $400 on account from Bailey. 4. Lewis paid $850 on account. Bought from Imbrie & Co. $200 of merchandise. 6. Taylor sold for $650 cash merchandise, for which the firm had paid $1,000. Sold on account to K. P. Temple $450; and to F. M. Wood $235. 7. Paid $40 for salaries; and $15 for supplies. 8. Paid $72 on insurance. Bailey paid his note of $100 and interest. 9. Cash sales were $275. The firm bought from Imbrie & Co. $675; Bonbright & Co. $800. 10. Paid Halsey note with $2.33 interest. 11. Received on account from Lord $100; and from cash sales $150. 13. Temple gave a non-interest-bearing note due in 30 days for $500. 14. Paid freight-in bill $32; and coal bill $17. Salaries of $40 were paid. 15. Paid note to Imbrie & Co. with interest. The receivers of C. H. Marks paid $164, the balance of the claim being valueless.

Summarize all journals (referring to Problem 1, Assignment XXII, and the above) and balance the cash book.

2. The following information has been taken from the books of the Valhalla Company after the ledger was adjusted:

Sales $2,896,745. Sales returns $22,840. Sales allowances $12,615. Inventories January 1, 19—, $3,096,720. Purchases were $1,216,000. Purchase returns $5,675; and allowances $4,200. Inventories on December 31, 19—, were $3,514,900. Rent expense $54,000. Bad debts $45,000. Depreciation $89,700. Advertising $50,000. Sales salaries $686,000. Traveling expenses $64,892. Freight-in $17,990. Freight-out $8,960. Delivery expense $22,600. Office supplies $13,400. Lighting $4,825. Office salaries $54,000. Telephone $2,190. Insurance $8,900. Taxes $22,940. Interest expense $7,890. Mortgage interest $60,000. Interest income $10,890. Income from securities $2,400. Sundry expenses $2,890. Repairs $14,890.

Draw up the statement of profit and loss.

3. Draft the journal entries necessary to close the ledger of the Valhalla Company. 4. Draw up the Profit and Loss account as it would appear in the ledger of the Valhalla Company. 5. Anthony B. Mans is the proprietor of a drug business owning assets and subject to liabilities as follows:

Cash $5,150. Accounts receivable $795. Stock of merchandise $25,340. Store furnishings $3,420. Soda fountain $1,250. Notes payable $4,500. Accounts payable $9,305.

He sells the business as above, excepting the cash which he retains, to James R. Hart for $20,000 cash, which includes a bonus of $3,000 for his good-will. Mans withdraws all cash and deposits it in his personal bank account.

Make the necessary entries in Mans’ journal and cash book to record the sale transaction and the withdrawal of cash.

XXIV As bookkeeper for Wm. C. Baldwin, dealer in coal and coke, you will use a general journal, a sales journal, a purchase journal, a cash book, and a ledger. Four double pages of journal paper and three double pages of ledger paper will suffice. At the top of the first page write “Journal of Wm. C. Baldwin.” Allow 130-150 lines for your Journal. The next blank double page will be used for a cash book, marked on the left at the top, “Dr.” and near the middle, “Cash.” Similarly the right page, “Cash”; and at the top, right-hand margin, “Cr.” Allow 80-100 lines for each side of the cash book. The next blank page mark “Sales Journal,” allowing 70-90 lines. The next blank page mark “Purchase Journal,” allowing 1 page. The last 3 pages, reserve for trial balances and statements. Number consecutively all pages in journal and ledger.

In the cash book use the first column on either side for items and the second column for totals and balances. Balance and rule the cash book at the end of each week, extending the “items” total before balancing and marking it for posting purposes “Cash, Dr.” or “Cash, Cr.” as the case may be. Enter the balance on the “Dr.” side in the “Total” column, and so keep each week’s receipts segregated. At the bottom of the page, unless it happens to coincide with the end of the week, carry “totals” of each side forward, not the balance.

In the sales and purchase journals mark the first column “On Account” and the second “Cash,” and make entries in them according as sale or purchase is “on account” or “cash.” If “cash,” entry must be made in the cash book also, in which case check the item in the ledger folio column in both journals, as total cash, sales, and purchases are to be posted from their respective journals. In making summary entries for the sales journal at the end of the month, rule and total each column, and bring the cash column total over on the next line into the “On Account” column, marking it “Cash Sales, Total.” Add these two and rule off, marking them “Sales, Cr.” The purchase journal will be handled similarly.

Open the following accounts in your ledger, beginning on the first page in the order given and allowing the number of lines to each account indicated by the numeral following each: Cash 10 Notes Receivable 5 M. R. Hamilton 10 F. S. Kent 10 H. T. Avery 10 G. C. Furnald 10 C. P. Pell 10 S. T. Hartley 10 A. D. Livingston 10 Reserve for Doubtful Accounts 5 Coal Inventory 5 Furniture and Fixtures 10 Depreciation Reserve Furniture and Fixtures 5 Building 5 Depreciation Reserve Building 5 Land 5 Notes Payable 10 M. H. Hanna & Co. 10 American Coke & Chemical Co. 10 Peabody & Co. 10 Seabord By-Product Coke Co. 10 Midtown Realty Co. 8 Wm. C. Baldwin, Capital 10 Wm. C. Baldwin, Personal 10 Profit and Loss 20 Sales 15 Purchases 10 Purchases Returns and Allowances 8 Freight & Delivery Inward 10 Salesmen’s Salaries 10 Advertising 10 Delivery Expense 10 Expense Supplies 15 Rent 5 Insurance 8 Office Salaries 10 Sundry Expense 8 Cash Short and Over 7 Interest Expense 8 Depreciation 5 Bad Debts 5 Interest Income 8

Before recording any transactions, study carefully the accounts, particularly the expense accounts, which you will keep. Make your classification strictly according to them. Keep no additional accounts.

May 2, 19—, Wm. C. Baldwin, long interested in the coke business, bought out the Newark Coke Company on the basis of the values shown below.

The assets taken over were:

Stocks of coal and coke $18,902.10. Accounts receivable: M. R. Hamilton $6,950. F. S. Kent $7,920. G. C. Furnald $2,450. C. P. Pell $7,125. S. T. Hartley $9,840. A. D. Livingston $2,890. Furniture and fixtures $1,200. A note made by G. C. Furnald for $7,800, due May 11, after which it was to bear 9% interest. This note was taken over at its face value.

The liabilities assumed were:

Accounts payable: M. H. Hanna & Co. $8,942.50. American Coke & Chemical Co. $12,437.18. Peabody & Co. $5,647.92. A note dated February 20, 19—, for three months at 6%, in favor of the Seaboard By-Product Coke Co., for $5,485.50, the accrued interest assumed being $65.83. In addition to the above investment Baldwin opened an account with the National City Bank for $15,000 as working capital.

May 3. Bought for cash, account books $10; stationery $18; stamps $25; paid rent to June 2, $500. Sales were: on account, M. R. Hamilton $1,293.75; for cash $890.40. 4. Bought coal and coke from M. H. Hanna & Co. on account $6,497.95. Paid freight-in $169.72. Bought insurance policy for one year $360. Sales were: on account, F. S. Kent $3,497.82; cash $614.80. 5. Paid Peabody & Co. balance due. Sales on account: H. T. Avery $1,876.49; G. C. Furnald $5,973.80; cash $617.90. 6. Bought from Seabord By-Product Co. on account $5,890.40. Allowed by M. H. Hanna & Co. $400 on account of impurities in coke. Paid freight-in $126.72. Sales were: on account, S. T. Hartley $3,487.60; M. R. Hamilton $2,947.30; F. S. Kent $2,476.30; cash $457.80. 7. Received cash on account from M. R. Hamilton $1,000; F. S. Kent $2,750; H. T. Avery $975; G. C. Furnald $5,250. Paid bookkeeper $30; stenographer $25; clerks $40. Sales for cash were $1,075. Baldwin drew $100 in cash and $80 in coal for his home. Paid delivery expenses $200; and sales salaries $300.

Balance, summarize, and post the cash book. The summary entry, “Cash, Dr.,” must, for this first week only, be set up opposite the total of the cash receipts journal, so as to include the cash capital invested. In all subsequent summary entries, the “Cash, Dr.” must include only the current week’s receipts—not the “Balance.”

9. Paid the American Coke & Chemical Co. on account $7,500; cash for supplies $62.50; and advertising $1,000. Sales on account: H. T. Avery $2,146.70; G. C. Furnald $1,786.42; C. P. Pell $792.50; A. D. Livingston $863.47. 10. Bought from the American Coke & Chemical Co. $5,746.80 on account. Paid by check $350 for safe; and $125 for typewriter. Received payments from C. P. Pell $2,500; and S. T. Hartley $2,150. 11. Paid M. H. Hanna & Co. $8,942.50; paid freight-in $248.50. Canceled $250 of order of the 10th from American Coke & Chemical Co. 12. Sales on account: A. D. Livingston $2,387.50; H. T. Avery $1,820. Paid demurrage charges $290.75 by check.

Instructions

May 2. To determine Baldwin’s net investment and to serve as a guide for the order of entry of the various items in the journal, make a rough draft of balance sheet. Enter the “cash” investment in the Journal as a part of the compound opening entry, and also in the “Total” column of the cash receipts journal. Check (✔) the “cash” item in the general journal and also check the capital investment entry in the cash receipts journal.

May 12. Charge demurrage costs to the Freight and Delivery Inward account.

XXV May 13. Bought from Peabody & Co. on account $4,910. Paid freight-in $144.70; paid to M. H. Hanna & Co., the balance due. Sales on account were: S. T. Hartley $1,875.20. 14. Paid bookkeeper $30; stenographer $25; clerks $40. Cash sales for the week were $3,679.80. Baldwin drew $200 in cash, and gave on his personal account 5 tons of coal worth $60 to the Community Association. Delivery expense was $220; and sales salaries were $300.

Balance, summarize, and post the cash book.

16. Bought from M. H. Hanna & Co. on account $4,895.70. Paid freight-in $82.93; Merchants’ Association dues $50; stationery $55.25. Received cash on account: G. C. Furnald $1,275; C. P. Pell $1,350. 17. Bought a multigraph for cash $75, and paid freight on it of $10.22. Paid $96.17 for supplies. Returned $800 worth of coke to M. H. Hanna & Co. Cash was short $5.48. Paid on account: A. D. Livingston $1,375; M. R. Hamilton $3,500; F. S. Kent $4,035. Sold on account: H. T. Avery $1,275; G. C. Furnald $862.70; and C. P. Pell $1,872.60. 18. Received a 30-day 6% note from S. T. Hartley for $5,000, to apply on account; and a note dated May 16 at 6%, due July 16, for $3,000, from A. D. Livingston. 19. Paid $38.90 for repairs to office steps, which were broken by accident, not chargeable to the landlord. Canceled a $100 lot from Peabody & Co. on the last order. Bought from the American Coke & Chemical Co. on account $7,580. Paid $103.72 in-freight. 20. Paid Seaboard By-Product Coke Co. note $5,485.50, and interest. Purchases for cash were $1,270. 21. Baldwin discounted his own note at the bank for $1,000, for 30 days at 6%. Paid bookkeeper $30; stenographer $25; clerks $40. Cash sales for the week were $3,195.60. Baldwin withdrew $400 in cash. Paid sales salaries $300; delivery expense $235; and American Coke & Chemical Co. $5,000 on account. Balance, summarize, and post the cash book. 23. Sold on account: A. D. Livingston $975.70; and M. R. Hamilton $1,392.65. Paid Patrol Protection Service $50; and $175 to repair heater and boiler, the latter item being allowed as applicable to future rent. 24. Sold refuse for cash $15.80. Bought from Peabody & Co. $2,120 on account, and paid freight $174.37. 25. Cash was short $1.04. Paid lighting bill of $31.75. 26. Received cash on account: F. S. Kent $1,500; H. T. Avery $1,875; G. C. Furnald $1,000. Sold on account: C. P. Pell $1,587; F. S. Kent $1,623.80; A. D. Livingston $1,217.80. 27. Purchased from Peabody & Co. on account, shipment of Pocahontas coal $900. Bought $50 worth of stamps. Cash was over $1.37. 28. Paid bookkeeper $30; stenographer $25; and clerks $40. Cash sales for the week were $2,175.80. Baldwin withdrew $250 for personal expenses. Delivery expenses were $245; and sales salaries $300. Paid the Seaboard By-Product Coke Co. bill of May 6. Balance, summarize, and post the cash book. 31. Paid Peabody & Co. $1,000 on account. Bought of M. H. Hanna & Co. on account $6,250. Telephone bill was $52.45; and cash was over $.51 (51 cents). Bought of Seaboard By-Product Coke Co. on account $2,890.70, paying $52.18 in-freight. Gave the American Coke & Chemical Co. a 90-day note at 6% for $1,250. A. D. Livingston paid $500 on account. Cash sales were $480.90. Received on account: M. R. Hamilton $3,000; F. S. Kent $2,000; C. P. Pell $2,500. Bought from Midtown Realty Co. the lot in which the yards were located for $2,000, and the buildings with equipment for $8,575, giving $5,575 in cash and executing a 6% mortgage on private properties not carried on the books of the business for the balance.

Instructions

May 14. The coal given to charity is a personal expense of Baldwin’s.

May 31. Record the purchase of lot and building as a credit for the entire amount to the vendor. Cancel the liability to the vendor by entry in the cash book for the cash portion, and in the general journal for the mortgage.

XXVI Balance the cash book, total, and make summary entries for the sales and purchase journals.

Post completely the sales and purchase journals, then the general journal and cash book. Be sure to post the weekly totals of cash receipts and cash disbursements as well as the totals for the end of the month.

Take a trial balance of account balances and record it on page 13 of your journals, labeling it “Trial Balance, May 31, 19—, Wm. C. Baldwin.”

Instructions

Refer to pages 142, 148, 149, for the form of the various journal summaries and to 547-548, practice data, for the method of summarizing.

Be very careful always to cross-index every posted item in both ledger and journals just as soon as the posting of that item is completed. The ledger folio columns in the journals are thus an indication as to how far the work of posting has proceeded, in case the bookkeeper is interrupted before completing the postings.

XXVII Draw up a balance sheet and statement of profit and loss for Wm. C. Baldwin, taking into account the following adjustments and inventories:

Interest prepaid on note at bank $3.33. Interest accrued on following notes: G. C. Furnald $39.00 S. T. Hartley 10.83 A. D. Livingston 7.50 ------ Total $57.33 Expense supplies inventory $14.50. Insurance unexpired $330. Merchants’ Association dues prepaid $47.92. Delivery expenses accrued $75. Salesmen’s salaries accrued $100. Advertising accrued $50. Advertising prepaid $200. Office salaries accrued $31.67. Prepaid rent $207.26. Furniture and fixtures are to be depreciated at the rate of 1% per month. Uncollectible accounts are estimated as ½% on sales for the month. Coal inventory $19,352.30.

Instructions

Use the method of the work sheet in doing this assignment. Follow closely the illustration in the text. After the work sheet has proved the accuracy of the work, draw up the formal statements.

XXVIII 1. Adjust and close Wm. C. Baldwin’s ledger, taking account of the adjustment data given in Assignment XXVII. 2. Take a post-closing trial balance.

APPENDIX B

PRACTICE WORK FOR STUDENT—SECOND HALF-YEAR

The practice work for the second semester is designed to give facility in the use of accounting records, and accuracy and confidence in the handling of a volume of transactions. Accordingly, this work consists largely of two somewhat extended problems to be recorded in blank books. The first is a problem in partnership, involving particularly the adjustment of partners’ accounts at the close of the fiscal period. Many points met in the operation of records using controlling accounts are included. The second is concerned with a trading corporation. Here some of the problems peculiar to the corporation are met, as well as those connected with the operation of a departmental business.

The stationery furnished provides two sets of blank books, as indicated above, the one for the partnership, the other for the corporation. Specific directions for their use are given with each problem. Upon completion of the problem these blanks are to be turned in for inspection and may be retained by the school if deemed best. A few miscellaneous problems are also provided. The loose-leaf supplies will usually be found suitable for their solution.

Here, also, sufficient practice work is furnished to accompany 30 hours of lecture or classroom work. If desired, this may be supplemented by the use of material in Appendix C. If an adequate understanding of the use and operation of accounting records is to be secured, disconnected problem work should not be substituted for the practice work provided in this Appendix B.

In handling this semester’s work, the student must not allow himself to fall behind in the preparation of the assigned work There is quite a volume of work to be done and the material of the various assignments is so interrelated that unless the practice work is kept up to date, most of its value is lost through the student’s not being ready to carry out instructions given covering the current work. Careful work and the proving of its accuracy will prevent much waste of time in making corrections.

I

This set comprises a general journal; a sales journal, a purchase journal, and the cash journals, for convenience bound together in one book; and a general ledger, purchase ledger, and sales ledger, also bound together in one book. Of the general journal, pages 1-15 inclusive will be used for transactions which cannot be recorded in the special journals, the rest of the blank being used as a place of record of the monthly trial balances. Of the special journal blank, pages 1-4 inclusive will be used for sales; pages 5-7 inclusive for purchases; page 8 and following for the cash book. For the purpose of securing a better comprehension of some features of the operation of controlling accounts the general journal is not provided with the customary analysis columns. The student is thus compelled to consider the effect of each entry on the controlling account as well as on the subsidiary account.

The sales journal provides for the analysis of sales into cash, credit, and partners’ withdrawals, the first column being the total or general column in which all items are to be entered; the others, “On Account,” “Cash,” and “Partners’ Withdrawals.” The same provisions, with the exception of the Partners’ Withdrawals column, are to be made in the purchase journal.

The cash book columns will be, on the debit side, General, Accounts Receivable, Sales Discount, and Net Cash; and on the credit, General, Accounts Payable, Purchase Discount, and Net Cash. All items affecting the controlling accounts, “Accounts Receivable” and “Accounts Payable,” are to be entered gross in their respective columns, the totals of which are posted to the controlling accounts when the cash book is summarized. The discount columns on both sides of the cash book are to be used for the recording of sales and purchase discounts, and all items to be posted to general ledger accounts other than the controlling accounts should be entered gross in the “General” columns. All amounts will be extended net into the “Net Cash” columns, and the difference between these two columns will represent the cash balance.

The general ledger will include pages 1-27 inclusive, the sales ledger pages 28-34 inclusive, and the purchase ledger 35-40 inclusive. The first four pages preceding ledger ruling are to be used for index purposes.

All transactions affecting individual customers’, creditors’, and partners’ accounts are to be posted daily to those accounts. The postings to the controlling accounts will follow the explanations in the text or special instructions.

This set affords the student facility in handling a partnership set of books operated under a controlling account system. The operation of this set will require great care in posting to controlling and subsidiary accounts in order to keep them in agreement.

To secure the maximum of practice with a minimum of detail work, the transactions for each month are summarized and are to be dated as of the last day of the month. The dates of issuance or maturity of the notes, however, are given so that this can be recorded.

The student should become familiar with the following ledger accounts to which he should strictly adhere in the classification of all transactions. These accounts are to be opened in the ledger at the places indicated. The first numeral following the account title indicates the page, the second the line on that page. “Line 1” refers to the very first line at the top of the page.

LEDGER ACCOUNTS (40 pages)

General ledger, pages 1-27 Sales ledger, ” 28-34 Purchase ledger, ” 35-40 Page Line Cash 1 1 Investments 1 12 Notes Receivable 1 18 Accounts Receivable 1 30 Reserve for Doubtful Accounts 2 28 Merchandise Inventory 2 34 Notes Receivable, Special 3 1 Deposit with Westchester Lighting Co. 3 11 Delivery Equipment 3 21 Depreciation Reserve Delivery Equipment 3 31 Store Furniture and Fixtures 4 1 Depreciation Reserve Store Furniture and Fixtures 4 11 Office Furniture and Fixtures 4 22 Depreciation Reserve Office Furniture and Fixtures 4 31 Building 5 1 Depreciation Reserve Buildings 5 11 Notes Payable 5 22 Accounts Payable 6 1 Mortgage Payable 6 30 C. Allen Cotten, Profits Loan Account 7 1 Scott Wooster, Profits Loan Account 7 12 Landsdowne Woolsey, Profits Loan Account 7 26 C. Allen Cottenm Capital 8 1 C. Allen Cotten, Personal 8 13 Scott Wooster, Capital 9 1 Scott Wooster, Personal 9 13 Landsdowne Woolsey, Capital 10 1 Landsdowne Woolsey, Personal 10 13 Profit and Loss 11 1 Sales 12 1 Sales Returns and Allowances 12 19 Purchases 13 1 Purchases Returns and Allowances 13 19 In-Freight and Cartage 14 1 Salesmen’s Salaries 14 13 Salesmen’s Traveling Expenses 14 26 Advertising 15 1 Delivery Expense 15 13 Shipping Supplies 15 26 Out-Freight 16 1 Office Salaries 16 13 Office Supplies 16 26 Office Expense 17 1 General Expense 17 13 Cash Short and Over 17 29 Charity Donations 18 1 Association Dues 18 13 Light and Heat 18 26 Rent 19 1 Insurance 19 13 Taxes 19 26 Depreciation 20 1 Sales Discount 20 13 Bad Debts 20 26 Interest Cost 21 1 Purchase Discount 21 13 Interest Income 21 26 Miscellaneous Sales 22 1

On pages 28-34 inclusive, enter the following customers’ accounts, four to the page:

Arnold Sheriff & Co. Atlas Dry Goods Co. Baird Dry Goods Co. Bostonian Dry Goods Co. Burrows Dry Goods Co. Century Dress Goods Co. Childs & Son Daniel & Co. Eagle Dress Goods Co. Emporium Dry Goods Co. Falk & Taylor Hudson Dry Goods Co. Macmillian & Co. Marquis Dress Goods Co. Melrose Dry Goods Co. Metropolitan Dry Goods Co. Henry Miller T. H. Miller National Dress Co. New York Silk Co. Public Bargain Store Rogers & Son Silk & Dress Goods Exchange Southern Dry Goods Co. Thompson Hudson Co. Wilson Williams Co. Young, Smith, Field Co.

Beginning on page 35, enter these creditors’ accounts, four to a page.

American Dry Goods Co. Associated Dry Goods Co. Bentley, Gray & Co. Claflins, Inc. Carter Dry Goods Co. Marshall Field & Co. Miller & Rhoades, Inc. Newcomb Endicott Co. Wm. Taylor, Son & Co. U.S. Dry Goods Co. Wico Mills, Inc.

II

C. Allen Cotten, who has long been in the wholesale merchandising business, anticipating a revival of commercial activity in the early part of 19—, decided to enlarge his business. Accordingly, on January 2, 19—, he enters into a partnership agreement with Scott Wooster, a former executive of the United Dry Goods Co., of Philadelphia, and Landsdowne Woolsey, a retired real estate and insurance broker of New York.

According to the terms of the partnership agreement, Cotten’s investment was his business, based upon the following balance sheet which represented the book value of the items:

C. ALLEN COTTEN BALANCE SHEET, December 31, 19—

Assets

CURRENT ASSETS: Cash $ 3,065.00 Notes Receivable (See Schedule 1) 2,500.00 Accounts Receivable (See Schedule 2) $25,150.00 Less—Reserve for Bad Debts 600.00 24,550.00 ---------- U. S. Liberty Bonds 3,000.00 Accrued Interest 90.00 Merchandise 21,780.00

DEFERRED CHARGES TO OPERATION: Prepaid Insurance $ 100.00 Office Supplies 150.00 Garage Rent 75.00 325.00 ---------- FIXED ASSETS: Delivery Trucks $ 5,000.00 Less—Depreciation Reserve 500.00 4,500.00 ---------- ---------- Total Assets $59,810.00

Liabilities

CURRENT LIABILITIES: Notes Payable (See Schedule 3) $ 4,000.00 Accounts Payable (See Schedule 4) 25,600.00 Accrued Interest on Notes 20.00 Accrued Taxes 190.00 ---------- Total Liabilities 29,810.00 ---------- Net Worth

Represented by: C. Allen Cotten, Capital $30,000.00

Schedules appended to the balance sheet of C. Allen Cotten:

Schedule 1. NOTES RECEIVABLE: Baird Dry Goods Co. $ 1,500.00 60-day 6% note due February 1. Childs & Son 1,000.00 Non-interest-bearing note, due February 15. ---------- $ 2,500.00 ========== Schedule 2. ACCOUNTS RECEIVABLE: Atlas Dry Goods Co. $ 2,283.00 Burrows Dry Goods Co. 2,000.00 Century Dress Goods Co. 4,800.00 Falk & Taylor 3,400.00 Marquis Dress Goods Co. 2,795.00 T. H. Miller 1,425.00 National Dress Co. 2,892.00 Rogers & Son 3,650.00 Wilson Williams Co. 1,905.00 ---------- $25,150.00 ========== Schedule 3. NOTES PAYABLE: Marshall Field & Co. $ 2,000.00 90-day 6% note due March 1, 19—. American Dry Goods Co. 2,000.00 90-day 6% note, due March 15, 19—. ---------- $ 4,000.00 ========== Schedule 4. Accounts Payable: Associated Dry Goods Co. $ 3,950.00 Claflins, Inc. 6,290.00 Wico Mills, Inc. 2,780.00 Miller & Rhoades, Inc. 5,672.00 Newcomb Endicott Co. 3,678.00 Marshall Field & Co. 3,230.00 ---------- $25,600.00 ==========

Cotten guaranteed the collection of all notes and accounts outstanding, and the partnership agreement provided that in case any of the accounts should be judged uncollectible by agreement among the partners or otherwise, such amount is to be charged to Cotten’s personal account on the date such items are found uncollectible.

Wooster’s investment was $20,000 cash, his services and experience; and Woolsey was admitted as a special partner investing $50,000 in cash.

The partnership agreement further provided that Cotten was to be allowed an annual salary of $4,800, Wooster $6,000, but Woolsey was to receive no salary; and that interest at the rate of 6% per annum was to be charged on the drawings in excess of the salary allowed for the fiscal period from the date such drawings exceeded salary until the date of closing the books. The drawings of Woolsey were also to be charged at 6% per annum from the date of draft to the date of closing the books. Interest at 6% per annum was to be allowed on capital, and in all cases was to be figured on the basis of 360 days to the year, 30 days to the month. Profits and losses were to be shared as follows: Woolsey 20%, Cotten 36%, and Wooster 44%. The fiscal period was to consist of six months, ending on June 30 and December 31, respectively.

The partnership agreement also provided that the capital accounts of the partners were to remain intact and that any credit balances remaining in the partners’ personal accounts at the close of the fiscal period were to be transferred to their loan accounts which were to be treated as current accounts bearing 6% interest and subject to adjustment of interest at the close of each fiscal period.

Make the necessary entries in general journal and cash book to record the respective investment transactions, and post.

Instructions

Make a full but concise statement of the partnership agreement, following the form of opening entry illustrated on page 166. This opening statement is the first record in the general journal and should provide all of the information needed by the bookkeeper for the proper handling of the partners’ accounts at the close of the fiscal period.

Immediately following this narrative will be the formal investment entries. On the line just preceding the formal investment entry for each of the partners, use the following—or similar—phraseology: “C. Allen Cotten made the following investment.” A separate investment entry is made for each partner.

These entries are to be made complete in the general journal and posted immediately, except the several cash items, which, included in the totals of the cash book, will be posted at the end of the month. These cash items will therefore be checked both in the journal and in the cash book, where they must be entered in the “General Ledger” and “Net Cash” columns.

III

Summarized transactions for the month of January were as follows. Enter these in their respective journals. Posting of these entries will comprise the next assignment.

Purchases: American Dry Goods Co., 2/10, n/60, $10,817.50. Bentley, Gray & Co., 2/10, n/60, $5,694. Claflins, Inc., 2/10, 1/30, n/60, $12,639. Carter Dry Goods Co., 2/10, 1/30, n/60, $18,709.48. U. S. Dry Goods Co., 3/10, 2/15, n/60, $12,104.90. Miller & Rhoades, Inc., 2/10, 1/30, n/60, $2,689.40. Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $1,897.42. Marshall Field & Co., 3/10, 2/15, n/60, $11,744.60. Cash purchases were $2,564.73.

Sales: Arnold Sheriff & Co., 2/10, 1/15, n/30, $5,264.80. Baird Dry Goods Co., 2/10, 1/15, n/30, $4,872.35. Bostonian Dry Goods Co., 2/10, 1/15, n/30, $3,843.68. Century Dress Goods Co., 2/10, n/30, $5,492.72. Childs & Son, 2/10, 1/15, n/30, $4,794.12. Daniel & Co., 2/10, n/30, $4,683.38. Eagle Dress Goods Co., 2/10, n/30, $5,978.35. Emporium Dry Goods Co., 2/10, n/30, $2,461.93. Falk & Taylor, 2/10, 1/15, n/30, $5,947.60. Hudson Dry Goods Co., 2/10, 1/15, n/30, $3,678.90. Macmillian & Co., 2/10, n/30, $4,642.50. Marquis Dress Goods Co., 2/10, n/30, $4,267.50. Metropolitan Dry Goods Co., 2/10, n/30, $4,180. Silk & Dress Goods Exchange, 2/10, n/30, $3,780.40. Cash sales were $847.56. Cotten took woolens on January 15, $50.

Journal: Goods for $500 were returned by Falk & Taylor as unsatisfactory. Macmillian & Co. was credited with $435 because of goods lost in transit, for which a claim was filed against the Central Hudson Railway Co. Damaged goods were returned to Carter Dry Goods Co., $897.80. Received 6% 60-day note, due March 28, from Century Dress Co. for January bill $5,492.72 less a special discount of 5%.

Cash Receipts (excluding those listed above): Arnold Sheriff & Co., January bill $5,264.80 less 2%. Bostonian Dry Goods Co., January bill $3,843.68 less 1%. Falk & Taylor, balance of January bill $5,447.60 less 2%. Hudson Dry Goods Co., January bill $3,678.90 less 1%. Atlas Dry Goods Co., December bill $2,283 net. Century Dress Goods Co., December bill $4,800 net. Falk & Taylor, December bill $3,400 less 2%. Rogers & Son, December bill $3,650 less 2%.

Cash Disbursements (excluding those listed above): Shelving, partitions, counters, etc., for store $3,800. Desks, tables, mimeograph, and typewriters for office $1,250. A new Pierce motor truck $5,000. Deposit with the Westchester Lighting Co. $50. Salesmen’s salaries $2,000. Salesmen’s traveling expenses $997.84. Wages of chauffeurs and shipping clerks $500. Garage rent $125. Repairs to cars $50. Licenses for trucks $50. Oil and gasoline $50. Boxes, crates, nails, paint, etc., for shipping $297.13. Advertising according to contract with Baten Advertising Co. $5,000 Freight and haulage $312.49. Insurance on stock $250. Lighting and heating service cost $502.60. Office salaries $990. Stationery, pads, pencils, envelopes, etc., $193.97. Telephone and telegraph $422. Postage and special messenger service $237.84. Wages of cleaners, watchman, repairs to elevator $594.70. Check to American Red Cross $100. Semiannual dues to the Merchants’ Association $50. Rent for January $1,250. Cotten drew $400; Wooster $500. Associated Dry Goods Co., December bill $3,950 less 2%. Claflins, Inc., December bill $6,290 less 2%. Wico Mills, Inc., December bill $2,780 net. Newcomb Endicott Co., December bill $3,678 less 2%. Marshall Field & Co., December bill $3,230 less 2%; and January bill $11,744.60 less 2%. Carter Dry Goods Co., balance of January bill $17,811.68 less 2%. U. S. Dry Goods Co., January bill $12,104.90 less 3%. American Dry Goods Co., January bill $10,817.50 less 2%. Cash was short $3.16. Rent for February $1,250.

Instructions

All cash transactions are to be entered in the cash book whether listed under “Cash” above or not. In recording a cash sale or cash purchase in the cash book, extend the amount into the “General Ledger” and “Net Cash” columns only.

Be sure to classify and post all items correctly, inasmuch as a wrong classification or posting may necessitate many correction entries.

The claim against the railroad company will be charged to Sales Returns and Allowances until a settlement is effected. Such items are often charged to a Freight Claims account, with suitable adjustment to Sales Returns and Allowances when settlement is made for less than the amount claimed.

The word “balance,” as in the phrase, “Falk & Taylor, balance of January bill $5,447.60 less 2%,” calls attention to an adjustment of some sort—returns or allowance—which has been or is to be considered in determining the amount still due.

Charge the freight and haulage to In-Freight and Cartage.

Great care must be exercised in the general journal entries affecting individual customers’ and creditors’ accounts, since these also affect their respective controlling accounts. Inasmuch as the general journal does not provide the customary analytic columns, it will be necessary, when making every such entry, to indicate the controlling account affected and, when posting, to post the item both to the individual account and to the control account. The following illustrations should be followed in making entries of this kind:

(1) Sales Returns and Allowances 12 500.00 Falk & Taylor (Accounts Receivable) 26/1 500.00 (2) Carter Dry Goods Co. (Accounts Payable) 33/6 897.80 Purchases Returns and Allowances 18 897.80 (3) Notes Receivable 1 5,218.08 Sales Discount 20 274.64 Century Dress Co. (Accounts Receivable) 25/1 5,492.72

Note particularly the way in which the ledger folios are shown for both accounts.

IV

Summarize the sales, purchase, and cash journals; balance the cash book.

In summarizing the sales journal, first total each column and draw a horizontal line under these amounts. On the next line record the summary entry, entering the amounts to be debited in the first money column and those to be credited in the second. The total of the partners’ withdrawals should not be posted, for they have already been transferred to the general ledger accounts at the time they occurred. The amount will therefore be checked in the summary entry. The total cash sales will also be checked, inasmuch as these have already been recorded in the cash book. The summary entry for the sales journal will appear as follows:

Accounts Receivable, Dr. ........ Partners’ Personal, Dr. ✔ ........ Cash, Dr. ✔ ........ Sales, Cr. ........

The purchase journal should be summarized somewhat similarly but the total purchases are to be debited to “Purchases,” the purchases on account credited to “Accounts Payable,” and the cash purchases are to be checked. The summary entry of this journal will be:

Purchases, Dr. Accounts Payable, Cr. ........ Cash, Cr. ✔ ........

In summarizing the cash journals, pencil-foot all columns of both journals. Then formally foot the columns on both sides, using the same line on both sides, i.e., the totals must appear on one line extending across both pages of the book. This may leave blank lines on either side according as one has had more entries than the other. Underline the totals. Make summary entries somewhat as follows:

In the receipts journal: Cash Sales Discount Accounts Receivable General ✔

In the disbursements journal: General ✔ Accounts Payable Purchase Discount ........ Cash ........

Use the first two money columns on either side for the entry of the amounts. Underline these entries through the four money columns. When posting these summary entries, the items “General” on either side will be checked as the details composing them have already been posted.

On the next line write in the Explanation columns on either side, “Net Cash as above,” and extend the total amounts of cash receipts and cash disbursements into the Net Cash columns on their respective sides. Balance the cash book by entering “Balance” on the disbursements journal and extending the amount in the Net Cash column. Show totals at the same level on both sides and draw double lines through all columns on both sides except the Explanation columns. Bring the cash balance down in the receipts journal.

Post completely all books of original entry. When posting the general journal, be very careful to post to the indicated controlling accounts. See Assignment III, Instructions, for the method to be followed.

Take a trial balance of your general ledger and record it under date of January 31, beginning on page 16 of the journal blank. Write “Trial Balances, 19—” at the top of the page and in the small space over the money columns “January 31.” From the general ledger, copy the names of all accounts, whether or not there are as yet any entries in them, in the order there shown. Do not include the individual customers’ and creditors’ accounts in the above list, for these are taken care of by the inclusion of their controlling accounts. Be careful to write the account name at the extreme left of the explanation space, close to the date column. Leave one line at the bottom of page 16 and at the top of page of 22 for “Totals” and “Totals Forward.”

Since one page is not sufficient to complete the record, continue it on page 22, there recording the rest of the accounts and heading the page and columns as on page 16. The intervening pages will be used as shown in Assignment VI.

Prove the controlling accounts against their subsidiary accounts. To make this proof, at the top of page 30 of the general journal, write “Balances of Accounts Receivable, 19—” and list the names of all customers’ accounts, writing the account name to the extreme left of the explanation space, close to the “Date” column. Place the words “January 31” in the small space over the first money column, in which the balances of accounts receivable for January will be recorded. Do not use the second money column on this page; this will be used for February balances.

Beginning on page 34, make a similar list of creditors’ accounts. The instructions covering the listing of accounts receivable apply here also, with the exception that the words “Accounts Payable” are to be substituted for “Accounts Receivable.”

List the individual account balances of customers’ and creditors’ accounts for each month, as described above, and record the total of each list in their respective columns. These totals must agree with the balances shown in the corresponding controlling accounts, i.e., the total of customers’ accounts outstanding for January must be equal to the balance of the controlling account, “Accounts Receivable,” shown in the general ledger. A discrepancy between a controlling account and its subsidiary accounts must always be located and corrected.

V

Summarized transactions for February were:

Purchases: American Dry Goods Co., 2/10, 1/30, n/60, $13,487.92. Associated Dry Goods Co., 2/10, n/60, $13,562.70. Claflins, Inc., 2/10, 1/30, n/60, $10,897.80. U. S. Dry Goods Co., 3/10, 2/15, n/60, $12,247.80. Marshall Field & Co., 3/10, 2/15, n/60, $17,792.90. Cash purchases $2,987.50.

Sales:

Arnold Sheriff & Co., 2/10, 1/15, n/30, $5,287.45. Atlas Dry Goods Co., 2/10, n/30, $5,794.32. Baird Dry Goods Co., 2/10, 1/15, n/30, $4,618.73. Burrows Dry Goods Co., 2/10, n/30, $3,289.49. Bostonian Dry Goods Co., 2/10, 1/15, n/30, $6,642. Century Dress Goods Co., 2/10, n/30, $4,497.35. Eagle Dress Goods Co., 2/10, n/30, $4,127.49. Emporium Dry Goods Co., 2/10, n/30, $4,793.80. Henry Miller, 2/10, n/30, $5,008.34. Melrose Dry Goods Co., 2/10, 1/15, n/30, $4,278.18 New York Silk Co., 2/10, 1/15, n/30, $3,874.70. Southern Dry Goods Co., 2/10, n/30, $5,087.92. Public Bargain Store, 2/10, n/30, $4,972. Cash sales $2,989.90. Cotten took woolens, February 28, $50.

Journal: Goods were returned by Century Dress Goods Co. $340, and Southern Dry Goods Co. $845, as unsatisfactory. Made Public Bargain Store an allowance of $85. Analysis of the January freight bill showed that $147.60 was paid for freight on sales. Returns to American Dry Goods Co. $978.

Cash Receipts: Baird Dry Goods Co., January bill $4,872.35 less 2%. Burrows Dry Goods Co., December bill $1,000 on account. Childs & Son January bill $4,794.12 less 1%. Daniel & Co., January bill $4,683.38 net. Eagle Dress Goods Co., January bill $5,978.35 net. Emporium Dry Goods Co., $1,000 on account. Arnold Sheriff & Co., February bill $5,287.45 less 2%. Atlas Dry Goods Co., February bill $5,794.32 less 2%. Bostonian Dry Goods Co., February bill $6,642 less 2%. Century Dress Goods Co., balance February bill $4,157.35 less 2%. Henry Miller, February bill $5,008.34 less 2%. Public Bargain Store, balance February bill $4,887 net. Cash was over $1.21. The note of Baird Dry Goods Co. for $1,500 was paid February 1 with interest, amounting to $15. The note of Childs & Son was paid, $1,000. Sold miscellaneous ends, $48.50.

Cash Disbursements: Bentley, Gray & Co., January bill $5,694 less 2%. Claflins, Inc., January bill $12,639 less 2%. Miller & Rhoades, Inc., December bill $5,672 net. Wm. Taylor, Son & Co., January bill $1,897.42 less 2%. Salesmen’s salaries $2,000. Salesmen’s railroad fares, hotel bills, etc., $1,013.48. Chauffeurs’ wages $240. Garage rent $125. Shipping clerks $210. Gasoline and oil $75.60. Fine for stopping car in front of hydrant $10. Paper, wrapping supplies, crates, $308.30. Wooster withdrew $500 February 15. Advertising as per schedule $3,000. Freight and haulage bills $257.80. Rent for March $1,250. Lighting and heating bills $497.58. Office manager’s and clerks’ salaries $998. Stationery, mimeograph supplies, etc., $214.40. Wages of cleaners, watchman, repairs to windows and new steps at door, $874.50. Telephone and telegraph $175.80. Messengers $128. Bought five $1,000 U. S. Liberty bonds at 95½, with accrued interest of $59.88. Cotten drew $400; Wooster $500. U. S. Dry Goods Co., February bill $12,247.80 less 3%.

Notice has been received that a receiver has been appointed for Wilson Williams Co.

Instructions

In making general journal entries affecting customers’ or creditors’ accounts, be sure to indicate the posting to the corresponding controlling accounts.

At the time the freight bills are paid, the total amount is charged to In-Freight and Cartage. They are analyzed later into freight paid on sales and in-freight, and the amount paid on sales is transferred to the proper account by means of a journal entry.

Record the sale of miscellaneous ends and the like in the cash receipts journal and post to Miscellaneous Sales.

Charge the $10 fine to Delivery Expense.

Be careful to charge the accrued interest on Liberty bonds to the proper account.

VI

Summarize the special journals. In summarizing the cash receipts journal for February and the following months, do not underline the totals of the General and Net Cash columns, as instructed in Assignment IV. Deduct the balance as of the first of the month from the totals shown in both columns, indicating, in the explanation column, the nature of this amount. (See page 282 for illustration.) Underline these amounts and write the summary entry for the cash receipts journal as previously explained, taking care that the Cash account is debited only with the receipts of the current month.

Post completely, being particularly careful in handling items affecting controlling accounts, especially when posting the general journal.

Take a trial balance of the general ledger as of February 28. In making record of this and succeeding trial balances, to obviate the necessity of rewriting account titles, fold back the two money columns on page 17 so that they “face up” on page 18, thus providing four money columns. This shortened leaf may now be used for recording trial balances for February and March. Similarly with succeeding leaves.

Do not fail to record the balances of customers’ and creditors’ accounts in the proper places, and prove the totals against their respective controlling accounts.

VII

Summarized transactions for March were:

Purchases: Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $8,942.50. Newcomb Endicott Co., 2/15, n/60, $7,414. U. S. Dry Goods Co., 3/10, 2/15, n/60, $7,609.40. Wico Mills, Inc., 2/10, 1/30, n/60, $8,337.80. Carter Dry Goods Co., 2/10, 1/30, n/60, $8,790. Bentley, Gray & Co., 2/10, n/60, $10,890.45. Marshall Field & Co., 3/10, 2/15, n/60, $10,219. Cash purchases $3,390.

Sales: Young, Smith, Field Co., 2/10, n/30, $6,874.32. Thompson Hudson Co., 2/10, n/30, $4,732.46. Rogers & Son, 2/10, n/30, $3,146.34. Public Bargain Store, 2/10, n/30, $3,590.70. National Dress Co., 2/10, n/30, $4,346.90. New York Silk Co., 2/10, 1/15, n/30, $6,784.50. Melrose Dry Goods Co., 2/10, 1/15, n/30, $7,894.80. T. H. Miller, 2/10, n/30, $6,237.40. Macmillian & Co., 2/10, n/30, $2,476.50. Hudson Dry Goods Co., 2/10, 1/15, n/30, $4,475. Falk & Taylor, 2/10, 1/15, n/30, $4,790. Eagle Dress Goods Co., 2/10, n/30, $3,105. Daniel & Co., 2/10, n/30, $3,490.70. Childs & Son, 2/10, 1/15, n/30, $4,789.40. Arnold Sheriff & Co., 2/10, 1/15, n/30, $3,980.40. Cash sales $2,462.75. Wooster drew merchandise $100.

Journal: Gave Marshall Field & Co. our 60-day 6% note due May 15, for their bill of February, $17,792.90 less 3%. Received merchandise returned by Melrose Dry Goods Co. $1,487.90. Returned goods to Associated Dry Goods Co. $416.90. Received a credit memo for $162.40 from Claflins, Inc. for spoiled goods. Macmillian & Co. gave us their 60-day 6% note, due May 25, for balance of January bill $4,207.50. Marquis Dress Goods Co. was allowed $485 for delay in transit. Out-freight for February was $139.86. Metropolitan Dry Goods Co. issued their 30-day 6% note, due April 15, for January bill $4,180.

Cash Receipts: Century Dress Goods Co. paid their note due March 28 with interest. Baird Dry Goods Co., February bill $4,618.73 less 2%. Burrows Dry Goods Co., February bill $3,289.49 net. Eagle Dress Goods Co., February bill $4,127.49 less 2%. Emporium Dry Goods Co., January bill $1,461.93 net. Marquis Dress Goods Co., December bill $2,795 net. Melrose Dry Goods Co., February bill $4,278.18 less 1%. T. H. Miller, December bill, $1,000 on account. National Dress Co., December bill, $1,000 on account. Southern Dry Goods Co., balance of February bill, $4,242.92 less 2%. Young, Smith, Field Co., March bill $6,874.32 less 2%. Thompson Hudson Co., March bill $4,732.46 less 2%. New York Silk Co., March bill $6,784.50 less 1%. Hudson Dry Goods Co., March bill $4,475 less 2%. Daniel & Co., March bill $3,490.70 less 2%. Childs & Son, March bill $4,789.40 less 2%. Arnold Sheriff & Co., March bill $3,980.40 less 2%. Rogers & Son, March bill $3,146.34 net. The receivers for Wilson Williams Co. declared March 15 an initial liquidating dividend of 35%, which was received.

Cash Disbursements: Salesmen’s salaries $2,000. Salesmen’s traveling expenses $1,896.42. Chauffeurs’ and shipping clerks’ wages $435. Garage rent $125. Gasoline, oil, and minor parts, $116.84. Crates, boxes, and packing materials, $412.80. Advertising as per schedule $3,000. Rent for April $1,250. Insurance policies, elevator, fire, plate glass, burglary, $550. Lighting and heating $512.90. Office salaries $1,872. Books, stationery, $226.40. Telephone and telegraph, postage, $896.40. Changing partitions $280. Wages of cleaners and watchman $490. Painting of partitions $28. New bell on elevator $18.75. Contribution to Salvation Army Drive $100. Cotten drew $400; Wooster $500. Cash was short $12.92. Freight bill $262.90. American Dry Goods Co., balance of February bill $12,509.92 less 2%. Associated Dry Goods Co., balance of February bill $13,145.80 less 2%. Claflins, Inc., balance of February bill $10,735.40 less 2%. Miller & Rhoades, January bill $2,689.40 net. Marshall Field & Co., March bill $10,219 less 2%. Paid Marshall Field & Co. and American Dry Goods Co. December notes with interest. Lent $5,000 to Woolsey, in return for which he issued to the order of the firm his six months’ 6% note for a similar amount.

Instructions

Record the interest received on notes receivable in the General Ledger column of the cash receipts journal.

Enter the Woolsey note in the proper account.

A liquidating dividend represents the amounts disbursed by a receiver to the creditors of the bankrupt.

VIII

Summarize the subsidiary journals. Post completely. Take a trial balance of the general ledger as of March 31. Prove the totals of the subsidiary accounts against the totals of their respective controlling accounts.

IX

Summarized transactions for April were:

Purchases: American Dry Goods Co., 2/10, n/60, $8,292.50. Associated Dry Goods Co., 2/10, n/60, $7,784.90. Claflins, Inc., 2/10, 1/30, n/60, $10,467.70. Miller & Rhoades, Inc., 2/10, 1/30, n/60, $6,742.80. U. S. Dry Goods Co., 3/10, 2/15, n/60, $8,276.40. Marshall Field & Co., 3/10, 2/15, n/60, $28,450. Wico Mills, Inc., 2/10, 1/30, n/60, $4,970.80. Cash purchases $1,988.75.

Sales: Arnold Sheriff & Co., 2/10, 1/15, n/30, $7,145.90. Atlas Dry Goods Co., 2/10, n/30, $6,890.70. Baird Dry Goods Co., 2/10, 1/15, n/30, $7,294.60. Bostonian Dry Goods Co., 2/10, 1/15, n/30, $9,874.50. Century Dress Goods Co., 2/10, n/30, $4,927.90. Daniel & Co., 2/10, n/30, $7,847.40. Hudson Dry Goods Co., 2/10, 1/15, n/30, $8,475.90. Henry Miller, 2/10, n/30, $5,982.90. Rogers & Son, 2/10, n/30, $7,826.90. Southern Dry Goods Co., 2/10, n/30, $7,495.80. Thompson Hudson Co., 2/10, n/30, $6,475.80. Young, Smith, Field Co., 2/10, n/30, $5,162.70. Cash sales $1,920.80.

Journal: Returned to Marshall Field & Co., $1,250 worth of merchandise of the February purchase, cash adjustment effective as of April 15 to be made at time of paying note. Returned goods to Miller & Rhoades, Inc., $650. Transferred a desk costing $125 from the office to the sales department of store. Received returned goods from Bostonian Dry Goods Co., $1,090; and from Henry Miller $785. Received a 30-day 6% note from the Silk & Dress Goods Exchange for January bill $3,780.40, due May 23. Out-freight for March was $152.90. The failure to book a payment of $10 for repairs on an annunciator partly explained the cash shortage in March.

Cash Receipts: Note of Metropolitan Dry Goods Co. for $4,180 was paid April 15, with interest. Burrows Dry Goods Co., balance of December bill, $1,000. Eagle Dress Goods Co., March bill $3,105 less 2%. Emporium Dry Goods Co., February bill $4,793.80 net. Falk & Taylor, March bill $4,790 less 2%. Macmillian & Co., March bill $2,476.50 less 2%. Marquis Dress Goods Co., balance of January bill $3,782.50 net. T. H. Miller, March bill $6,237.40 less 2%. Melrose Dry Goods Co., balance March bill $6,406.90 less 1%. New York Silk Co., February bill $3,874.70 net. National Dress Co., on account, December bill, $1,000. Arnold Sheriff & Co., April bill $7,145.90 less 2%. Baird Dry Goods Co., April bill $7,294.60 less 2%. Hudson Dry Goods Co., April bill, $8,475.90 less 2%. Southern Dry Goods Co., April bill $7,495.80 less 2%. Thompson Hudson Co., April bill $6,475.80 less 2%. Young, Smith, Field Co., April bill $5,162.70 less 2%. The firm discounted its 90-day 6% note, due July 15, at the Merchants National Bank for $5,000. The receivers for Wilson Williams Co. declared another liquidating dividend of 15%. Received from the railroad $25, an overcharge on demurrage.

Cash Disbursements: Sales salaries $2,975. Salesmen’s traveling expense $2,243.60. Delivery expense $763.87. Packing supplies $513.90. Advertising for April $3,000, and for May $3,000, less $250 as discount for prepayment. Freight bills $297.60. Light and heating $212.50. Office salaries $2,140. Office supplies $365.70. Office expense $988.95. General expense $897.12. Rent for May $1,250. Bentley, Gray & Co., March bill $10,890.45 less 2%. Wico Mills, Inc., March bill $8,337.80 less 2%. U. S. Dry Goods Co., March bill $7,609.40 less 2%. Wm. Taylor, Son & Co., March bill $8,942.50 less 2%. American Dry Goods Co., April bill $8,292.50 less 2%. Claflins, Inc., April bill $10,467.70 less 2%. Newcomb Endicott Co., March bill $7,414 less 2%. Miller & Rhoades, Inc., balance of April bill, $6,092.80 less 2%. Woolsey withdrew April 30 $500; Cotten, $400; and Wooster $500. New adding machine and desks for office $500. Paid taxes $190.

Instructions

Include the discount received on advertising with the purchase discounts. The charge to Advertising will, therefore, be gross.

Be sure to make the purchase discount adjustment necessitated by the returned goods transaction with Marshall Field & Co. Though this and the returned goods are to be taken into consideration when the note is paid, do not enter them now in the Notes Payable account, that adjustment being made at time of payment of note. Enter them in the Marshall Field & Co. account.

Disregard the depreciation adjustment on the desk transferred to the sales department.

Record the face of the discounted note in the General Ledger column, the amount of discount in the Sales Discount column with an (X) mark, and the net amount in the Net Cash column. In summarizing the cash book, this discount should be segregated from the total to be posted to Sales Discount, inasmuch as the former will be posted to Interest Cost.

Credit the overcharge on demurrage to In-Freight and Cartage.

X

Summarize the journals. In summarizing the debit side of the cash book previous to posting, remember that included in the Sales Discount column is an item of bank discount on the firm’s $5,000 note, which must be shown separately and charged to Interest Cost. Be sure you show this in the summary entries, in addition to the Sales Discount summary. To accomplish this the total of the Sales Discount column is best shown in two portions, the Sales Discount total on the one line, and the Interest Cost item on the next line.

Post completely.

Take a trial balance of the general ledger as of April 30.

Prove the subsidiary accounts against their respective controlling accounts.

XI

1. Summarized transactions for May were:

Purchases: Bentley, Gray & Co., 2/10, n/60, $9,764.90. Carter Dry Goods Co., 2/10, 1/30, n/60, $29,417.70. Newcomb Endicott Co., 2/15, n/60, $10,846.40. Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $9,497.50. Marshall Field & Co., 3/10, 2/15, n/60, $11,145.80. Cash purchases $1,872.45. Sales: Arnold Sheriff & Co., 2/10, 1/15, n/30, $9,465.80. Baird Dry Goods Co., 2/10, 1/15, n/30, $8,467.90. Century Dress Goods Co., 2/10, n/30, $9,748.80. Daniel & Co., 2/10, n/30, $7,492.40. Hudson Dry Goods Co., 2/10, 1/15, n/30, $9,948.30. New York Silk Co., 2/10, 1/15, n/30, $9,742.50. Silk & Dress Goods Exchange, 2/10, n/30, $9,865.80. Southern Dry Goods Co., 2/10, n/30, $10,480. Thompson Hudson Co., 2/10, n/30, $8,942.75. Young, Smith, Field Co., 3/10, n/30, $16,290. Cash sales $1,694.90.

Journal: Young, Smith, Field Co. returned $1,985 worth of merchandise; and Century Dress Goods Co., $625 worth. Out-freight for April was $147.42. Received from the National Dress Co., a 60-day acceptance drawn on the United Textile Co. in favor of the firm, due July 15, for $5,000. Returned to Newcomb Endicott Co. $2,200 of merchandise. Gave Associated Dry Goods Co. our 90-day note dated May 15, non-interest-bearing, but with 90 days’ interest, $114.43, included in the face, for their bill of April $7,784.90 less 2% cash discount. Marshall Field & Co. note adjusted. Final settlement of Wilson Williams Co. was effected May 15. (See “Cash Receipts.”) Due to temporary embarrassment of the Silk & Dress Goods Exchange, their note was extended one month.

Cash Receipts: Arnold Sheriff & Co., May bill $9,465.80 less 2%. Atlas Dry Goods Co., April bill, $3,000 on account. Baird Dry Goods Co., May bill $8,467.90 less 2%. Bostonian Dry Goods Co., balance of April bill, $8,784.50 less 2%. Century Dress Goods Co., April bill, $2,500 on account. Daniel & Co., April bill, $5,000 on account. Hudson Dry Goods Co., May bill $9,948.30 less 2%. New York Silk Co., May bill $9,742.50 less 2%. Public Bargain Store, March bill, $2,500 on account. Southern Dry Goods Co., May bill $10,480 less 2%. Young, Smith, Field Co., balance May bill, $14,305 less 2%. Interest on Liberty bonds due May 15, $119.75. Cash was over $42.65. For use of one of the motor trucks for the week, $100 was received. Sold packing materials, $80.75. Macmillian & Co., paid their note with interest May 25. Received $275 from the Central Hudson Railway Co. on our claim made in January. The receivers for Wilson Williams Co. paid a final liquidating dividend of 10%.

Cash Disbursements: Salesmen’s salaries $2,985. Salesmen’s traveling expenses $2,213.72. Delivery expenses $886.94. Shipping and packing materials and supplies $516.70. Advertising for June $3,000 less $250 discount for prepayment. Rent for June $1,250. Freight and haulage $467.90. Lighting and heating $186.40. Office salaries $2,040. Office supplies $240.60. Office expense $1,167.70. General expense $912.67. A contribution of $250 was made to the State University fund. Paid Marshall Field & Co. note May 15 with interest and adjustment. Newcomb Endicott Co. balance of May bill, $8,646.40 less 2%. Cotten withdrew May 15, $400; Wooster $500; and Woolsey $1,000. Carter Dry Goods Co., March bill $8,790 net. Wico Mills, Inc., April bill $4,970.80 less 1%. U. S. Dry Goods Co., April bill $8,276.40 less 2%. Wm. Taylor, Son & Co., May bill $9,497.50 less 3%. Marshall Field & Co., May bill $11,145.80 less 2%.

2. The Acorn Manufacturing Company, a corporation, is organized with a capitalization of $250,000 of which $150,000 is common stock and the remainder preferred. The company buys the plant of Brown & Towne, whose balance sheet appears below, issuing therefor $75,000 of common stock and $25,000 of preferred stock. The partners transfer all assets except cash and the vendee assumes the liabilities.

BALANCE SHEET OF BROWN & TOWNE July 1, 19—

Assets Liabilities Cash $ 10,000.00 Notes Payable $ 2,000.00 Notes Receivable 30,000.00 Accounts Payable 1,000.00 Accounts Receivable 20,000.00 Mortgage Payable 5,000.00 Inventory 30,000.00 Brown, Capital 46,000.00 Plant and Machinery 10,000.00 Towne, Capital 46,000.00 ----------- ----------- $100,000.00 $100,000.00 =========== =========== July 5. The remainder of the preferred stock is subscribed for at 90 and paid in cash. 12. Subscriptions to common stock for $25,000 at 110 are received and paid in cash.

20. The remaining common stock is subscribed for at 90 to be paid for in four equal instalments at intervals of one month. Dec. 1. All calls were met as due. Paid the organization tax and filing fees in cash $250.

Prepare journal entries for the above on the books of the Acorn Manufacturing Company.

3. The A B Corporation is formed with a capital stock of $100,000, consisting of 1,000 shares par value $100 each. A subscribes for 500 shares, B for 200, C for 200, and D for 100. B, C, and D pay cash for their subscriptions. A pays in full for his subscription by turning over a business he has been conducting. The corporation acquires the assets and assumes the liabilities of A’s business as follows:

A’S BALANCE SHEET

Assets Liabilities

Merchandise $15,000.00 Accounts Payable $ 6,000.00 Accounts Receivable 19,000.00 A, Capital 40,000.00 Notes Receivable 12,000.00 ---------- ---------- $46,000.00 $46,000.00 ========== ==========

(a) Make the necessary entries to open the books of the corporation. (b) Make the necessary entries to close the books of A.

Instructions

Transfer the net claim against Marshall Field & Co., appearing in their account, to Notes Payable through the general journal. The balance of the note remaining in the latter account will be offset by the debit to be posted from the cash disbursements journal. In calculating the interest to be paid on the above note, take cognizance of an interest adjustment dating from April 15.

Transfer a sufficient amount from the Wilson Williams Co. account to the Reserve for Doubtful Accounts so that the balance of the latter account will be wiped out. The balance in the Wilson Williams Co. account is to be charged in accordance with the partnership agreement.

Credit the amount received for the use of the delivery truck to Delivery Expense.

The payment made by the railroad company should be credited to Sales Returns and Allowances to offset the debit made previously.

Problems 2 and 3 are, of course, separate problems not to be recorded in the books of Cotten, Wooster & Co.

XII

1. (a) Summarize the subsidiary journals. (b) Post completely. (c) Take a trial balance of the general ledger as of May 31. (d) Prove the subsidiary accounts against their respective controlling accounts.

2. At the end of the year net profits amount to $15,000, with a previous surplus balance of $50,000. Preferred stock amounts to $100,000, of which $20,000 is treasury stock; common amounts to $150,000, of which $50,000 has not been issued. The directors declare an 8% dividend on the preferred, and a 10% on the common, and appropriate $5,000 to a sinking fund reserve. Later the above dividends are paid. Make the entries needed to bring the above onto the books.

3. A corporation authorizes a $250,000 bond issue, of which $150,000 are traded for a plant, and $50,000 are sold on the open market at 102. The bonds bear 6% interest, payable semiannually. Show how you would handle the above transactions. Show your treatment at the time of the first interest payment, assuming the bonds to mature in 25 years.

Instructions

Problem 1 refers to the Cotten, Wooster & Co. problem.

Problems 2 and 3 do not relate to Cotten, Wooster & Co.

XIII

Summarized transactions for June were:

Purchases: American Dry Goods Co., 2/10, n/60, $16,145.75. Associated Dry Goods Co., 2/10, n/60, $15,927.80. Claflins, Inc., 2/10, 1/30, n/60, $17,894.60. Wico Mills, Inc., 2/10, 1/30, n/60, $4,792.45. U. S. Dry Goods Co., 3/10, 2/15, n/60, $15,867.42. Miller & Rhoades, Inc., 2/10, 1/30, n/60, $16,279.80. Newcomb Endicott Co., 2/15, n/60, $15,318.40. Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $5,728. Marshall Field & Co., 3/10, 2/15, n/60, $6,716.90. Cash purchases $1,813.40.

Sales: Arnold Sheriff & Co., 2/10, 1/15, n/30, $8,465.90. Baird Dry Goods Co., 2/10, 1/15, n/30, $7,964.60. Burrows Dry Goods Co., 2/10, n/30, $6,279.45. Bostonian Dry Goods Co., 2/10, 1/15, n/30, $9,763.80. Childs & Son, 2/10, 1/15, n/30, $7,942.45. Eagle Dress Goods Co., 2/10, n/30, $8,246.70. Emporium Dry Goods Co., 2/10, n/30, $7,847.65. Falk & Taylor, 2/10, 1/15, n/30, $8,972.70. Hudson Dry Goods Co., 2/10, 1/15, n/30, $7,432.80. Macmillian & Co., 2/10, n/30, $6,972.50. Marquis Dress Goods Co., 2/10, n/30, $8,414. Metropolitan Dry Goods Co., 2/10, n/30, $3,985. Melrose Dry Goods Co., 2/10, 1/15, n/30, $8,945. New York Silk Co., 2/10, 1/15, n/30, $7,987.50. Southern Dry Goods Co., 2/10, n/30, $9,475.65. Cash sales $1,472.60.

Journal: Out-freight for May was $157.90. Returned goods received from Daniel & Co., $1,875; and Thompson Hudson Co., $935. Received from Rogers & Son, Charles L. Sutton & Co.’s 90-day 6% note for $5,000, dated May 5, with 40 days’ interest accrued, in payment of their April bill, the balance of the payment in cash. Returned $967.50 of merchandise to Miller & Rhoades, Inc.; and $614.75 to Wico Mills, Inc. Cash over of May was partly accounted for by failure to book sale of old crates and supplies for $35. The note of the Silk & Dress Goods Exchange, extended to and due June 23, was not paid, as the firm was still in difficulties. A mortgage for $25,000 was given to complete the purchase of the building. (See “Cash Disbursements.”)

Cash Receipts: Arnold Sheriff & Co., June bill $8,465.90 less 2% Atlas Dry Goods Co., balance of April bill $3,890.70. Century Dress Goods, balance of April bill $1,802.90. Daniel & Co., on account $5,000. Henry Miller, on account $2,500. National Dress Goods Co., balance March bill $238.90. Public Bargain Store, on account $500 Rogers & Son, balance April bill $2,793.57. Thompson Hudson & Co., balance May bill $8,007.75 less 2%. Bostonian Dry Goods Co., June bill $9,763.80 less 2%. Southern Dry Goods Co., June bill $9,475.65 less 2%. Macmillian & Co., June bill $6,972.50 less 2%.

Cash Disbursements: Salesmen’s salaries $5,340. Salesmen’s traveling expenses $2,917.94. Delivery expenses $978.42. Shipping supplies $523.80. Advertising for July $3,000, less $250 for prepayment. Freight and haulage $569.70. Rent for July $1,250. Insurance on auto trucks $250. Lighting and heating $92.70. Office salaries $2,465. Office supplies $369.74. Office expenses $1,254.60. General expenses $1,219.62. Cotten withdrew June 15 $400; Wooster $500. Bentley, Gray & Co., May bill $9,764.90 less 2%. Wm. Taylor, Son & Co., June bill $5,728 less 2%. Semiannual dues to the Merchants’ Association $50. Purchased a lot and building for $35,000, paying $10,000 in cash and the balance remaining on mortgage.

Instructions

Charge the Silk & Dress Goods Exchange note to their account.

Additional data on the mortgage transaction are given under “Cash Disbursements.” In the general journal entry make explanation of the entire transaction, including the cash portion, which will of course be entered formally only in the cash book. In the cash book entry, by way of explanation, give cross-reference to the general journal explanation.

XIV

Summarize the subsidiary journals. Post completely. Take a trial balance of the general ledger as of June 30. Prove the totals of the subsidiary accounts against their respective controlling accounts.

XV

Prepare a work sheet, as of June 30, 19—, for the six months, taking account of the following adjustments and inventories. Follow carefully the form shown in Chapter XXVII.

Accrued Expenses: Salesmen’s salaries $485. Shipping clerks’ and chauffeurs’ wages $265. Unpaid garage bills $182.50. Freight bills $55.60. Office salaries $287.50. Lighting expense estimate $25. Watchman’s and cleaners’ wages $106. Taxes $300. Prepaid Expenses: Advertising $3,000. Rent $1,250. Insurance $790. Merchants’ Association dues $50. Interest on note payable to the order of the Associated Dry Goods Co. $57.21. Interest on the note due the Merchants’ National Bank $12.50.

Accrued Income: Interest on Liberty bonds $47.50. Interest on the note of Charles L. Sutton & Co. $46.67. Word has been received from the attorneys that the note of the Silk & Dress Goods Exchange, which had been extended and not paid when presented, will be met in full with accrued interest of $42.84. Out-freight for June, $169.70. Charge depreciation as follows: 10% per annum on office and store furniture and fixtures; 20% per annum on delivery equipment. Create a reserve for bad debts equal to ½% of gross sales. Inventories were: merchandise $102,560; office supplies $257.80; shipping supplies $387.60. Charge and credit the partners with interest as per the partnership agreement.

Instructions

Do not close the books of the firm nor draw up the formal statements.

Be content for this assignment with the making of the work sheet.

Close the work sheet as usual by the transfer of the net profit from the Profit and Loss columns to the credit column of the balance sheet.

Immediately following and on the same page with the work sheet, provide for showing the distribution of profits and interest and salary adjustments. The following illustration will indicate how this may be done.

============+===============+=============+=============+============= ITEMS | PROFIT & LOSS | X PER 36% | Y PER 44% | Z PER 20% ------------+---------------+-------------+-------------+------------- Net Profit | | | | as above | $18,364| | | | | | | Salary | | | | Allowances |$ 5,400 | $2,400| $3,000| | | | | Partners’ | | | | Drawings | |$3,000 |$3,100 |$1,500 | | | | Interest on | | | | Excess | | | | Drawings | 36| 18 | 3 | 15 | | | | Interest on | 3,000 | 900| 600| $1,500 Capitals | | | | | | | | Balance | | | | Distributed| | | | in Profit | | | | and Loss | | | | ratio | 10,000 | 3,600| 4,400| 2,000 | | | | Balance of | | | | Personal | | | | accounts | | | | to Loan | | | | accounts | |3,882 | 4,897 | 1,985 ----------+---------------+-------------+-------------+------------- |$18,400 $18,400|$6,900 $6,900|$8,000 $8,000|$3,500 $3,500 +===============+=============+=============+=============

The item “Net Profit as above” is taken from the work sheet. The Profit and Loss columns, in conjunction with the detailed distributions shown in the “Partners’ Personal” columns, contain all the data needed for the appropriation section of the profit and loss statement and also for distributing the net profit shown by the Profit and Loss account. By entering the drawings in the “Partners’ Personal” columns, those columns are made to develop the amount of undrawn profits of each partner. They thus contain the same information which the respective personal accounts will contain after the ledger is closed. The work sheet, with this appended analysis of profits and partners’ personal accounts, thus contains all of the information needed both for drawing up the formal statements and for adjusting and closing the books.

XVI

Draw up a pro forma balance sheet and a statement of profit and loss for the six months for Cotten, Wooster & Company. In drawing up the balance sheet, head it as follows:

Exhibit A COTTEN, WOOSTER & COMPANY BALANCE SHEET June 30, 19—

Show the total of all customers’ accounts as “Accounts Receivable (See Schedule A-1).” Attach to the balance sheet a list or schedule of all customers’ accounts to support the title “Accounts Receivable (See Schedule A-1),” carried in the balance sheet. Give to it as a formal heading:

Schedule A-1 COTTEN, WOOSTER & COMPANY LIST OF ACCOUNTS RECEIVABLE June 30, 19—

The data for the schedule come from the customers ledger list or trial balance for June 30.

Attach schedules also for the other groups of items appearing in the balance sheet, viz.: Deferred Charges to Operation under which include in addition to the other items listed, the office supplies and packing materials still on hand; Accrued Income; Accounts Payable; and Accrued Expenses.

The use of schedules relieves the balance sheet of much detail and renders it more intelligible; it also makes the detail available if desired.

Set up the net worth section as follows:

Net Worth Represented by: C. Allen Cotten: Capital $........ Undrawn Profits (See Schedule A-6) ........ $........ -------- Scott Wooster: Capital $........ Undrawn Profits (See Schedule A-6) ........ ........ -------- Etc.

Supporting Schedule A-6 will appear as follows:

Schedule A-6 COTTEN, WOOSTER & COMPANY UNDRAWN PROFITS, June 30, 19—

============================+=========+=========+========= DISTRIBUTIONS OF PROFITS | COTTEN | WOOSTER | WOOLSEY | 36% | 44% | 20% ----------------------------+---------+---------+--------- Salary for the half-year | $ | $ | Interest on capital | | | $ Share of Profit and Loss | | | | --------| --------| -------- Totals | $ | $ | $ | --------| --------| -------- Deduct: | | | Interest on overdrafts | $ | $ | $ Drawings for the half-year | | | | --------| --------| -------- Totals | $ | $ | $ | --------| --------| -------- Undrawn profits transferred | | | to Loan Accounts | $ | $ | $ +=========+=========+=========

The data for this schedule are secured from the “Profits Distribution” section of the work sheet.

In drawing up the profit and loss statement refer to the forms already shown. See Chapters XXVI and XXVII. The Miscellaneous Sales item should be added to the Net Sales short-extended and their total should be full-extended, from which should be deducted Cost of Goods Sold as usual.

After the item, “Net Profit for the period,” set up the appropriation section, showing the shares of each of the partners, somewhat as follows:

Net Profit for the period $........

Add: Interest charged to partners on overdrafts: C. Allen Cotten $........ Scott Wooster ........ Landsdowne Woolsey ........ ........ -------- -------- Amount to be distributed as: $........

Salary: C. Allen Cotten $........ Scott Wooster ........ $........ -------- Interest on Capitals: C. Allen Cotten $........ Scott Wooster ........ Landsdowne Woolsey ........ ........ -------- In Profit and Loss Ratio: C. Allen Cotten, 36% $........ Scott Wooster, 44% ........ Landsdowne Woolsey, 20% ........ $........ -------- ------- ========

Excepting for the Accounts Receivable and Accounts Payable schedules, the detailed data for balance sheet and profit and loss statements come from the work sheet drawn up for Assignment XV. Set up the formal statements on letter size (8½ × 11) paper. Typewrite them if possible.

XVII

Using the “Adjustment” columns of the work sheet as a guide, make the adjusting entries in the general journal.

Using the profit and loss statement (including the appropriation section) as a guide, set up the closing entries in the general journal. Use the “Profits Distribution” section of the work sheet as the source of the transfer of the balances of the partners’ personal accounts to the loan accounts.

Post the adjusting and closing entries. Rule the ledger accounts. Take a post-closing trial balance of the general ledger.

XVIII

This set comprises a general journal; a sales journal, a sales returns and allowances journal, a purchase journal, a purchase returns and allowances journal, and the cash journals, for convenience bound together in one book; a note journal to be used as a posting medium for notes receivable and notes payable; and a general ledger, a purchase ledger, and a sales ledger, bound together in one book. Of the subsidiary journal blank, page 1 is for the sales journal, page 2 the sales returns, page 3 the purchase journal, page 4 the purchase returns, and pages 6-9 the cash journals. Of the ledger blank, pages 1-15 comprise the general ledger, pages 16-19 the sales ledger, and pages 20-22 the purchase ledger. The general journal will be used as previously, i.e., for the record of all items not otherwise specially provided for. The sales journal provides for analysis of the sales, the first column being the total or general column; the others, Dept. A, Dept. B, and Out-Freight, respectively. The sales returns and allowances journal makes provision for the same analysis as the sales journal except that there is no Out-Freight column, that not being used; the purchase journal columns are respectively, Total, Dept. A, Dept. B, and In-Freight, with the same column headings for the purchase returns and allowances journal, except as to In-Freight. The cash book columns will be, on the debit, General, Accounts Receivable, Sales Discount, and Harding National Bank; and on the credit, General, Accounts Payable, Purchase Discount, and Harding National Bank. The note journal will be analyzed, summarized, and posted just as the other subsidiary journals.

The deposit account carried with the Coolidge National Bank is an inactive one. For this reason no extra column is provided for it in the cash book.

Daily posting of items affecting customers’ and creditors’ accounts should be made, carefully observing the terms of credit.

The general journal is provided with six money columns, three of which are to be devoted to charges and the other three to credits. The debit columns are to be headed, Accounts Payable, Accounts Receivable, and General, respectively. The credit columns will be headed similarly but in the reverse order, having the General column close to the ledger folio column. All amounts to be posted to accounts in the general ledger should be recorded in the General column, and those affecting a controlling account in its respective column. The latter amounts should be posted to the subsidiary account immediately, but will not be posted to the controlling account until the general journal is summarized at the end of the month. Record will be made of transactions for the last month of the fiscal year, the previous eleven months being summarized in the trial balance given to start with.

The Business Equipment Corporation was organized and incorporated under the laws of the state of New York. Its fiscal year closes on December 31. A trial balance from the general ledger on November 30, 19—, shows as follows:

1 Harding National Bank $ 6,521.25 1 Coolidge State Bank 5,000.00 1 Consignment Accounts Receivable 1 Petty Cash 200.00 1 Notes Receivable 8,419.80 2 Accounts Receivable 146,838.05 2 Reserve for Doubtful Accounts $ 2,574.85 2 Investments 12,750.00 2 Notes Receivable Special 3 Department A, Inventory 78,769.40 3 Department B, Inventory 52,918.25 3 Delivery Equipment 13,000.00 3 Depreciation Reserve Delivery Equipment 8,000.00 4 Store and Warehouse Furniture and Fixtures 4,500.00 4 Depreciation Reserve Store and Warehouse Furniture and Fixtures 2,000.00 4 Office Furniture and Fixtures 1,250.00 4 Depreciation Reserve Office Furniture and Fixtures 500.00 5 Buildings 60,000.00 5 Depreciation Reserve Buildings 15,000.00 5 Land 10,800.00 5 Mortgage on Real Estate 35,000.00 6 Notes Payable 6,472.50 6 Accounts Payable 94,969.17 6 Dividends Payable Common 6 Dividends Payable Preferred 7 Capital Stock Common 100,000.00 7 Capital Stock Preferred 100,000.00 7 Surplus 34,792.80 8 Profit and Loss 9 Department A, Purchases 478,860.00 9 Department A, Purchases Returns and Allowances 15,678.90 9 Department B, Purchases 397,725.00 9 Department B, Purchases Returns and Allowances 12,796.40 10 In-Freight and Cartage 9,642.57 10 Department A, Sales 567,819.60 10 Department A, Sales Returns and Allowances 10,649.30 10 Department B, Sales 471,932.40 11 Department B, Sales Returns and Allowances 7,427.80 11 Salesmen’s Salaries and Commissions 29,942.70 11 Salesmen’s Traveling Expenses 17,897.60 11 Advertising 22,000.00 12 Sales General Expense 23,649.30 12 Out-Freight 472.73 12 Insurance 7,562.40 12 Office Expense 2,890.78 13 Office Supplies 3,697.40 13 General Expense 12,897.48 13 General Salaries 32,894.72 13 Interest and Bank Expense 2,344.52 586.13 14 Sales Discount 15,849.50 14 Bad Debts 14 Depreciation 14 Purchase Discount 10,297.80 15 Taxes 15 Mortgage Interest 1,050.00 15 Consignment 15 Consignment-Out ------------- ------------ $1,478,420.55 $1,478,420.55 ============= =============

Instructions

Open all the above accounts in your general ledger, at the places indicated, and enter under date of December 1 the balances given in the trial balance. The number in front of the account title indicates the page on which to enter the accounts. Give each one-fourth of a page, except on page 2, where give Accounts Receivable two additional lines by shortening the space for Investments.

In the sales ledger (which is controlled by the Accounts Receivable account on the general ledger), beginning on page 16, open the following accounts, four to a page, and enter the balances as of December 1:

Alexander, Hill & Co. $ 10,187.60 Automatic Pencil Sharpener Co. 1,279.00 Browne Morse Co. 4,279.85 Clark & Smith 6,798.94 General Fireproofing Co. Hall, Walter & Co. 2,967.09 Franklin Moffit Co. 22,897.42 Peerless Motor Co. John B. Scrivener Standard Truck Co. 217.90 Second Third National Bank 650.00 Willis, Dickson, Inc. 14,679.80 Yonkers Carpet Works Sundry Customers 82,880.45 ----------- $146,838.05 ===========

In the purchase ledger (which is controlled by the Accounts Payable account on the general ledger), beginning with page 20, open the following accounts, four to a page, and enter the balances as of December 1:

American Banking Machine Co. $ 7,894.20 American Duplicator Co. 2,985.75 American Kardex Co. 6,732.84 Automatic Pencil Sharpener Co. 480.00 Apex Office Supply Co. 2,797.90 Dictation Devices Co. 5,724.75 Filing Systems & Cabinet Co. 6,894.80 Library Bureau 7,894.90 Protectograph Co. 2,147.35 Yawman & Erbe Mfg. Co. 10,897.50 Sundry Creditors 40,519.18 ----------- $ 94,969.17 =========== The two accounts, “Sundry Customers” and “Sundry Creditors,” are used to secure volume of transactions without involving too great detail. They should be treated in all respects as personal accounts.

In the notes receivable journal, enter the following notes:

No. 84, made by Clark & Smith in our favor, for merchandise, dated September 18, 19—, for three months at 6%, amount $1,987.50.

No. 87, made by Hall, Walter & Co., in our favor, for goods purchased, dated October 5, at 6% for two months, amount $2,500.

No. 88, draft drawn by the company on Willis, Dickson, Inc., dated October 28, at 60 days, amount $2,750.

No. 91, made by Franklin Moffit Co., in our favor, for merchandise, dated November 15, at 6% for 30 days, amount $1,182.30.

Total the “Amount” column and rule it off as this amount is already in your general ledger “Notes Receivable” account.

In the notes payable journal, enter the following notes:

No. 32, made by the company in favor of the Yawman & Erbe Mfg. Co., dated October 15, for two months for $1,472.50 at 6%.

No. 31, made by the company in favor of the Harding National Bank for discount, dated October 20, at 6% for 60 days, amount $5,000.

Enter these in the notes payable journal and treat as with notes receivable above.

Your books, general and subsidiary, will now show the condition as at the beginning of business December 1.

XIX

Make record in the various books of original entry of the following transactions for December, figures at left margin indicating day of month. Where needed, directions appear at the close of each assignment.

Dec. 1. Sold Browne Morse Co., 1/10, n/30, $1,538.40 (A), and $408.75 (B) on which the company prepaid freight and charged to them $58.85. Received on account from Willis, Dickson, Inc. $2,000. Paid cash on account to American Banking Machine Co., $2,000. 2. Bought of the Yawman & Erbe Mfg. Co., 2/5, n/20, $2,989.80 (A), and $3,347.65 (B). Sold Clark & Smith, 2/10, n/60, $3,276.40 (A), and $1,562.32 (B). Received cash on account from Alexander, Hill & Co., $3,500. Paid cash on account to Filing Systems & Cabinet Co. $2,000. 3. Sold General Fireproofing Co., 1/5, n/30, $2,190, (A). Received cash from Sundry Customers $5,547.80. Paid American Kardex Co. $3,500 on account. 5. Sold Hall, Walter & Co., 3/10, n/30, $1,279.60 (A), and $390.45 (B). Received payment on Hall, Walter & Co. note No. 84, with interest. Browne Morse Co. paid their bill of December 1, less 1%. Paid American Duplicator Co., November balance less 1%. Received $2,497.80 from Sundry Customers. 6. Bought of the Automatic Pencil Sharpener Co., 4/10, n/30, $679 (B). Bought from Apex Office Supply Co., 1/10, n/30, $1,497.80 (A), and $896.45 (B). Sold Peerless Motor Co., 1/10, n/60, $2,679.40 (A), and $1,243.70 (B), with prepaid freight charged them $22.90. Received $2,500 on account from Willis, Dickson, Inc. Gave our 30-day note No. 33, at 6%, in favor of Library Bureau, to apply on account, $3,000. Paid Sundry Creditors $8,191.75. 7. Sold Second Third National Bank, 1/5, n/60, $425 (B). Paid Yawman & Erbe bill of December 2, less 2%. Received from Sundry Customers $2,976.80 on account. Sold Browne Morse Co., 1/10, n/30, $1,215.60 (A), and $671.15 (B). Clark & Smith returned goods, invoice of December 2, $127.50 (A), and $16.18 (B). General Fireproofing Co. paid their invoice of December 3 less 1%. Second Third National Bank paid their November balance less 1%. 9. Bought of Dictation Devices Co., 1/10, n/30, $3,784.90 (A), and $1,781.19 (B). Paid cash for insurance $275. In making a deposit at the bank, a $20 note was found to be counterfeit. 10. A note receivable for $2,500 was received from the president, due in six months at 6% in return for a loan made to him by the company. Sold Automatic Pencil Sharpener Co. $896.40 (B), 1/5, n/30. Received cash on account from Franklin Moffit Co. $7,500. Browne Morse Co. paid $2,000 on account. Paid Apex Office Supply Co., $2,500 on account. 12. Bought of the Protectograph Co., n/60, $2,976.80 (B). Sold Alexander Hill & Co., 2/5, n/30, $1,569.70 (A), and $972.80 (B). Hall, Walter & Co. returned goods, invoice of December 5, $92.78 (A), and $121.47 (B). Received balance from Clark & Smith, invoice of December 2, less 2%. Paid Yawman & Erbe Mfg. Co. $5,000 on account; and Dictation Devices Co. $2,500. The Second Third National Bank paid their invoice of December 7, less 1%. 13. John B. Scrivener, the secretary, withdrew for his home use $125.80 (A), and $48.90 (B). Sold Browne Morse, 1/10, n/30, $894.65 (A) and $1,292.45 (B). Returned to Automatic Pencil Sharpener Co. $207 (B) of the invoice of December 6. Paid $890 for changing the partitions in the warehouse. Took from stock a new sofa, $275 (A) for use in salesrooms. 14. Purchased from American Banking Machine Co., 3/10, n/30, $1,472.85 (A), and $4,561.40 (B). Sold Standard Truck Co., 1/10, n/30, $684.90 (A), and $516.75 (B), with prepaid freight charged them $62.81. Received $2,500 on account from Franklin Moffit Co. Paid Protectograph Co. $2,000 on account. 15. Sent a consignment of Department A goods, $1,200 to G. A. Roberts, to be sold on a 5% commission basis. Drew a 30-day sight draft on Alexander Hill & Co. to apply on account, $2,500, which was accepted. Hall, Walter & Co. gave a 30-day 6% note for balance of their bill of December 5, less 3%. The Franklin Moffit Co. note was paid with interest. Received from Automatic Pencil Sharpener Co. in full settlement, the net balance due as shown by their two accounts, advantage being taken of the discounts both ways. Paid Yawman & Erbe note due today with interest.

Instructions

December 5. Record the interest received from Notes Receivable in the Interest and Bank Expense account.

December 10. Be sure to enter the note received from the president to the correct account.

December 13. For stock withdrawn for use of business, make entry in the general journal.

December 15. Transfer through the general journal the claim of the Automatic Pencil Sharpener Co. to their account in the sales ledger, taking into consideration the sales discount to be allowed and the purchase discount to be taken. Remember to record these amounts in the proper columns. The balance of the latter account will be offset by the credit from the cash receipts journal.

XX Dec.

16. Bought from American Kardex Co., 3/10, n/30, $629.50 (A), and $350.40 (B). Bought on account of the Yonkers Carpet Works, n/90, carpets and floor materials for showrooms. They charged $890 for the carpets, etc., and $125 for labor in laying them, with freight prepaid by them and charged to the company of $22.80. Returned to the Protectograph Co. $258 (B). Gave Apex Office Supply Co. 30-day note at 6%, for bill of December 6, less 1%. The Peerless Motor Co. paid their bill of December 6, less 1%. 17. Sold Franklin Moffit Co., 1/10, n/30, $987.40 (A), and $1,642.70 (B), with prepaid freight charged them $62.15. Paid in-freight and cartage bills to date $569.47. 19. Bought of American Duplicator Co. $4,897 (A), n/60, with prepaid freight $297.69. Sold Willis, Dickson, Inc., n/10, $892.50 (A), and $274.90 (B). The Clark & Smith note was paid with interest. Browne Morse Co. gave the company a 30-day 6% note for the bill of December 7, less 1%. Drew from stock for completing showrooms, furnishings $2,790 (A), and $650 (B). Hall, Walter & Co. paid the company $100 for the use of one of the motor trucks for the week. Alexander, Hill & Co. paid their bill of December 12, less 2%. Gave Dictation Devices Co. $2,500, 30-day note at 6% and the balance in cash, in settlement of invoice of December 9, less 1%. Paid note due at bank today. 20. Sold Sundry Customers to date receiving full cash payments $2,447.50 (A), and $1,679.35 (B). Sold Yonkers Carpet Works Co., 1/10, n/30, $889.70 (A), and $632.40 (B). Paid American Banking Machine Co. $5,000 on account. 21. Returned to American Banking Machine Co. $289.50 (A), and $186.70 (B), of invoice of December 14. The company accepted the draft, to apply on account, drawn by the American Kardex Co., at 60 days from December 18, for $2,500. Paid Filing Systems & Cabinet Co. $2,500 on account. 22. Bought from Filing Systems & Cabinet Co., 3/10, n/30, $3,695 (A), and $4,272 (B), with prepaid freight charges of $116.74. Sold Clark & Smith, 2/10, n/60, $1,462.80 (A), and $1,937.60 (B). Hall, Walter & Co. paid $1,000 on account. Browne Morse Co. returned goods $197.60 (A), and $59.70 (B). 23. Word was received that one of our Sundry Customers has gone into the hands of a receiver, owing $490, and settlement with creditors was made on the basis of 40% of all claims, cash being received for that amount. Bought of Library Bureau, 1/10, n/30, $2,897 (B). Sold Alexander, Hill & Co., 1/10, n/30, $1,785.90 (A), and $2,476.80 (B). Paid Library Bureau $3,000 on account. Browne Morse Co. paid balance of their bill of December 13, less 1%. 24. The company discounted its note at the Harding National Bank for 60 days at 6%, $5,000. Paid balance on American Banking Machine Co. bill of December 14, less 3%. Bought of Yawman & Erbe Mfg. Co., 2/5, n/20, $4,567.90 (A), and $976.50 (B). Received on cash sales $458.60 (A), and $1,124.70 (B). Received a check from Willis, Dickson, Inc., for $5,000. Paid Yawman & Erbe Mfg. Co. $5,000. Standard Truck Co. gave a 30-day note at 6% for bill of December 14, less 1%. 27. We called to the attention of Willis, Dickson, Inc. an undercharge of $100 in the bill of December 19 in the Department B sale. Returned merchandise to Sundry Creditors $1,910 (A), and $897.50 (B). Sundry Customers returned goods $619 (A), and $1,490 (B). Paid advertising $2,000. Paid cash for purchases $4,209 (A), and $2,010.70 (B). Franklin Moffit Co. paid $5,000 on account. The Willis, Dickson, Inc. draft was given to the bank for collection. 28. The Willis, Dickson, Inc., draft was sent back because of insufficient funds. Protest fees paid by the bank and charged to the company were $2.50. Sold Sundry Customers, n/30, $5,196.40 (A), and $8,927.30 (B). Paid the American Kardex Co. bill of December 16, less 3%. Received payment from Clark & Smith for bill of December 22 less 2%. Paid the Filing System & Cabinet Co.’s bill of December 22, less 3%.

Instructions

December 16. Record the purchase made from the Yonkers Carpet Works in the proper column of the general journal. Charge Sales General Expense.

December 19. Credit the income received for the use of the motor truck to Sales General Expense.

December 23. Refer to page 411 of the text as to the handling of the balance of the firm’s claim against the bankrupt customer.

December 24. Cash sales will be recorded in the sales journal and included in the debit to Accounts Receivable account at time of summary. To offset this inflated debit, at the time cash sales are recorded also in the cash book the amount will be entered there in the Accounts Receivable column—not the General Ledger—and will thus be included in the credit to the Accounts Receivable account.

December 27. Record the Willis, Dickson, Inc. undercharge in the sales journal.

The entry of cash purchases is similar to that of cash sales.

XXI Dec. 29. Upon presentation at the office of Willis, Dickson, Inc., the draft due December 27 was paid with the protest charge. Bought from Library Bureau, 1/10, n/30, $3,297 (B), with in-freight $269.87. Made partial payment to Yonkers Carpet Works $300. 30. Bought of Sundry Creditors, n/30, $11,816.80 (A), and $16,519.70 (B). Sold Sundry Customers, n/30, $32,279.90 (A), and $26,819.40 (B). Yonkers Carpet Works paid their invoice of December 20 less 1%. Received cash from sale of old showroom fixtures $1,450. The fixtures cost $2,500 five years ago and have been depreciated at the rate of 10% per annum since that time. Received a check for $317.90 from Standard Truck Co.; and checks and cash from Sundry Customers $53,606.97, less $897.48; to one of whom we issued check for $25 due to inability to make change. 31. Reimbursed petty cash for cash vouchers $116.80, and distributed same: $62.40 to Sales General Expense; $23.10 to Office Expense; and the balance to General Expense. Paid Sundry Creditors, invoices of $29,467.45, less $842.90 discount. Paid sales salaries $4,200; salesmen’s traveling expense $3,872.80; sales general expense $748.45; general salaries $3,764.90; advertising for January $2,000; general expense $1,714.92; office expense $482.70; interest and bank expense $86.80; office supplies $287.95.

The statement from the bank as of December 31 showed the following:

Items not entered on the Business Equipment Corporation books:

Interest credited, $24.79 Collection charges, 2.36

Checks outstanding: #1296, $1,347.60 #1314, 75.80 #1315, 16.82 #1318, 192.47 #1329, 181.64 #1331, 296.70 #1342, 897.60

A check from a sundry customer for $100, deposited on December 30, was returned by the bank as uncollectible. The company had not yet been informed of this.

Balance by bank was $14,848.73.

Reconcile the bank statement with the cash book balance shown previous to the entry in the cash book of any items from the bank statement, and determine the true cash balance.

Summarize all books of original entry. Posting of these summary entries and any other unposted items will be deferred to the next assignment.

Instructions

December 30. Refer to pages 416-418 of the text as to the proper record to be made of the sale of the old showroom fixtures. Credit the gain on this sale to the Sales General Expense.

December 31. The amount of check for $25 is included in the amount received from sundry customers.

In summarizing the general journal, first foot all the columns and underline the totals. On the following lines write the summary entry which will appear as follows:

General General ...... General Ledger ✔ ...... Accounts Receivable ...... Accounts Payable General Ledger ........ Accounts Receivable ........ Accounts Payable ........

Since the items making up the “General Ledger” totals have already been posted, these totals will be checked and will not be posted.

In summarizing the sales journal, the cash sales need not be segregated from the credit sales in the summary entry, inasmuch as the inclusion of such receipts in the total to be posted to Accounts Receivable from the cash receipts journal will eliminate the inflation of the claims against customers shown by the controlling account.

The purchase journal will be summarized in the same way as the sales journal.

The items shown on the bank statement but not yet entered in the cash book are to be entered there before summarizing the cash book. See page 562 for instructions as to its summary.

For summarizing the other journals follow the explanations given in Chapter XXXI.

XXII Post completely.

Take a trial balance of the general ledger, recording it on a double sheet of journal paper. When posting customers’ and creditors’ accounts, make sure that the corresponding controlling accounts will receive, either in totals or in items, the same amounts.

Prove your sales and purchase ledgers and record the proof with the general ledger trial balance, i.e., make a list or schedule of the accounts and show the list totals as agreeing with their respective controlling account balances in the general ledger trial balance.

XXIII

Prepare a work sheet for the year ending December 31, 19—, taking the following adjustments into consideration:

Accrued Expenses: Salesmen’s salaries $385. General Salaries $416.90. Amount due on repairs to building $500. Mortgage interest $1,050. Interest on notes: Library Bureau note $12.50; Apex Office Supply Co. note $5.92; Dictation Devices Co. note $5. Accrued freight bills $824.34. Accrued taxes $378. Chauffeurs’ wages $160.60. Garage bills $216 ($100 for gasoline and balance for repairs). Automobile tire $90.

Prepaid Expenses: Interest on note discounted at the Harding National Bank $44.17. Advertising $2,000. Insurance $2,867.90. Prepaid dues to Merchants’ Association $50.

Accrued Income: Interest on following notes: notes receivable special $8.75; Hall, Walter & Co. $3.77; Browne Morse Co. $3.73; Standard Truck Co. $1.46. Bank interest on inactive deposit with Coolidge State Bank $24.36. Upon analysis, $387.86 of the freight bills was found to be out-freight. Take into account depreciation at the yearly rates of: 3% on buildings; 20% on delivery equipment; 10% on office furniture and fixtures. No depreciation is to be charged on the store and warehouse furniture and fixtures just installed. Create a reserve for doubtful accounts equal to 1/2% of net sales. Inventories showed the following on hand: Department A $79,897.80; Department B $51,764.32; office supplies $296.45. In-freight was apportioned between the departments on the basis of net purchases. Charge 90% of insurance expense to selling expenses.

In answer to our request, G. A. Roberts submitted the following information regarding his consignment:

Sales to customers $800.00 Expenses paid by him: Freight and drayage $58.22 Insurance 12.54

A formal account sales will not be rendered till completion of sales of entire consignment. The quantities of unsold articles reported showed, upon pricing, a valuation of $600. Word was also received that a check for the amount due on sales as above would follow immediately after certification by the bank. It was decided to defer one-half of the above expenses reported by the consignee as applicable to the remainder of the consignment.

The Board of Directors declared the regular semiannual dividend of 4% on the preferred stock, payable January 25, and a 4% dividend on the common stock, also payable January 25.

Analysis, based on vouchers and invoices, showed the following content of the Sales General Expense account before adjustment:

Garage rent $1,800.00 Chauffeurs’ wages 8,969.34 Shipping clerks’ wages 2,775.13 Gasoline and oil 2,491.68 Licenses, Trucks 96.00 Repairs 895.46 Stationery, supplies, and postage 1,237.29 Tires and tubes 714.78 Crates, boxes, and shipping supplies 1,374.30 Light and heat 3,775.37 Carpets and labor for showroom 1,037.80 Sundries 330.80 Profit on sale of old storage and warehouse furniture and fixtures 200.00 Renting of truck 100.00

Likewise, a similar analysis of the General Expense account before adjustment showed the following distribution:

Cleaners’ and watchman’s wages $4,369.75 Repairs to buildings 2,174.65 Changes in partitions 1,215.79 Auditor’s fees 1,500.00 Legal fees 2,500.00 Contributions 1,000.00 Light and heat 1,869.43 Merchants’ Association dues 100.00 Sundries 824.08

Instructions

Refer to Chapter XLVIII of the text as to consignments. In this case make use of the Consignment Accounts Receivable account for recording the claim against the consignee, and be careful to charge the proper amount of expenses against the income to be taken into the earnings for this period. Handle the deferred expense items on the consignments in the Out-Freight account. Do not forget to adjust the memorandum accounts so that they will show the value of goods still out on consignment, and take the latter amount into consideration when setting up the final inventories on the books.

XXIV

Using the work sheet as a guide, draw up pro forma balance sheet and statement of profit and loss for the year ending December 31, 19—. Show the gross profit on the sales of each department. Support both the balance sheet and the profit and loss statement with properly set-up schedule.

Instructions

Balance Sheet. Where the number of accrued and deferred items is small, they may be shown on the face of the balance sheet or in attached schedules as preferred. See page 577 for form of schedules.

Profit and Loss Statement. Where the record of the period’s business has been made by departments, it is desirable that the summary for the period show departmental results, at least so far as the gross profit stage. To get rid of the detail on the face of the statement, schedules may be appended showing such items as Cost of Goods Sold, the group of Selling Expenses, the group of General Administrative Expenses, etc. Such a statement of profit and loss, supported by schedules, is called a condensed profit and loss statement. Such a statement for a departmental business is shown by the following illustration. Only Schedule B-1 is given; the other schedules are merely lists with their totals shown.

Exhibit B JACKSON EDWARDS COMPANY STATEMENT OF PROFIT AND LOSS For the Year Ending December 31, 19—

Department Department Total A B Sales $100,000.00 $150,000.00 $250,000.00 Less—Returns and Allowances 5,000.00 6,000.00 11,000.00 ----------- ----------- ----------- Net Sales $ 95,000.00 $144,000.00 $239,000.00 Cost of Goods Sold (Schedule B-1) 60,000.00 90,000.00 150,000.00 ----------- ----------- ----------- Gross Profit $ 35,000.00 $ 54,000.00 $ 89,000.00 =========== =========== Selling Expenses (Schedule B-2) $ 35,000.00 General Administrative Expenses (Schedule B-3) 20,000.00 Financial Management Expenses (Schedule B-4) 5,000.00 60,000.00 ----------- Financial Management Income (Schedule B-5) 2,000.00 58,000.00 ----------- ----------- Net Profit $ 31,000.00 ===========

Schedule B-1 JACKSON EDWARDS COMPANY COST OF GOODS SOLD For the Year Ending December 31, 19—

Department Department Total A B Inventory, January 1, 19— $12,000.00 $ 18,000.00 $ 30,000.00 Purchases 60,000.00 87,500.00 147,500.00 In-Freight 3,500.00 5,000.00 8,500.00 ----------- ----------- ----------- $75,500.00 $110,500.00 $186,000.00 ----------- ----------- ----------- Deduct: Purchase Returns $ 2,000.00 $ 3,000.00 $ 5,000.00 Inventory, December 31, 19— 13,500.00 17,500.00 31,000.00 ----------- ----------- ----------- $15,500.00 $ 20,500.00 $ 36,000.00 ----------- ----------- ----------- Cost of Goods Sold $60,000.00 $ 90,000.00 $150,000.00 =========== =========== ===========

In preparing the schedules of expenses, refer to the previous assignment for the analysis of the Sales General Expenses and General Expense accounts.

Analyze the Interest and Bank Expense account into expense and income, and show these items separately in the statements.

XXV

Adjust and close the ledger through the general journal in accordance with the data given in Assignment XXIII.

XXVI

1. The sales of the Radcliffe Company last year January to June, amounted to $752,465. It is estimated that the price level for the current year will be 10% lower than a year ago. Due to plans for increased publicity and sales effort, it is expected that the volume of sales for the corresponding period this year will be 15% larger than last year’s. The average rate of turnover is 3½ and the mark-on is 35%.

What will be the average amount of capital required to finance the merchandise stock?

2. In establishing a buying quota for a three-month period, the Gotham Novelty Company has available from its records the following data: present inventory at retail $79,800; sales corresponding period last year $316,000; estimated sales volume this year same as last but 15% less in value. It is thought that the rate of turnover can be increased. It is therefore decided to reduce the stock carried so that at the close of the period there will be on hand a stock 20% less in volume.

Assuming that the price level is 15% less at the end of the period and that the mark-on is 40%, determine the company’s buying quota for the period.

3. The sales representative of the Natty Uniform Company is making his regular call on the Salem Dry Goods Co., whose buyer has just secured the following data from the accounting department:

Salesroom stock on hand at beginning of period $32,000. Additions to salesroom stock to date $45,000. Sales to date $52,000. Stocks in transit and on present order $15,000 There is no stock in the warehouse. Planned sales for the period are $75,000 but a revised estimate calls for a 10% increase. Stock planned to be on hand at the end of the period is $25,000.

Is the buyer open to buy and, if so, how much?

4. Your Notes Receivable account shows $25,000 of customers’ notes on hand. Being in need of cash you discount $10,000 of these at the bank, receiving therefor a credit of $9,750 in your bank account. Fifteen days later the bank notifies you that $4,000 of these notes have been paid by their makers at maturity, but that a note for $1,000 signed by J. B. Grant has been charged back on account of non-payment.

Make all the entries, in journal form, to record the above.

5. On April 1, 19—, Jones of Trenton, N. J., ships an invoice of goods to Smith in New York. The goods are valued at $2,000, and the consignor pays freight amounting to $40, and insurance $30. The consignee pays cartage amounting to $50, and storage $40. On April 2, Jones draws a 30-day draft against Smith for $500, which is duly accepted on April 5. The goods are sold for $2,700. Smith’s commission is 5%.

Set up the necessary accounts both on the books of the consignor and on those of the consignee properly to reflect the above transactions.

6. Prepare the closing entries for the following consignment sale. The consignment was received July 8, account of William Nevins & Co., showing an invoice value of $3,750. You paid freight and cartage $87.50, and insurance $18.75. Sales were made July 16, $1,000, and July 25, $1,525, on a 5% commission basis. On July 31, upon closing your books, you inventory the unsold balance of the consigned goods as $2,500.

7. From the following data, relating only to customers and creditors, prepare as of December 31, 19—, Accounts Receivable and Accounts Payable accounts. Indicate in folio column the book of original entry from which each item is obtained.

1. Accounts receivable, balance January 1, 19— $1,200.00 2. Accounts payable, balance January 1, 19— 1,350.00 3. Sales 4,000.00 4. Purchases 2,500.00 5. Return sales 200.00 6. Return purchases 100.00 7. Cash received from customers 3,200.00 8. Discount allowed customers 100.00 9. Cash paid creditors 1,800.00 10. Discount allowed us 50.00 11. Customers’ notes indorsed to creditors 500.00 12. Notes received from customers 600.00 13. Freight paid by us for customers 40.00 14. Cash received from creditor for overpayment 20.00 15. Customer’s check deposited returned by bank 300.00 16. Customer’s note indorsed to creditor (see item 11) dishonored and returned 250.00 17. Protest fees on above 5.00 18. Allowance for damages on goods purchased 30.00 19. Cash returned to customer for overpayment 10.00 20. In item 3 (Sales) included in total sales was one to creditor 100.00

XXVII

1. An investment company purchased for investment $100,000 of 6% 10-year municipal debentures at 96, and $200,000 of 5% industrial bonds, 15 years to run, at 104.

How would you treat the discount and the premium in the accounts? Give the journal entries.

2. The authorized capital stock of a corporation is $500,000, divided into 5,000 shares, par value $100. Of this amount $400,000 has been subscribed and paid for in full. The corporation purchases ten shares of a dissatisfied stockholder for $75 a share, and five other stockholders each donate five shares to the company. Five shares of the purchased stock and all of the donated stock are sold for $50 a share.

(a) Draft proper entries and show the ledger accounts and balances. (b) How would the balances of the accounts in (a) appear in a balance sheet? (c) Give the entries and show the ledger accounts and balances if the capital stock were of no specified par value, but 5,000 shares had been issued at $80 and the other conditions remain as stated in the first paragraph. (d) How would the balances of the accounts in (c) appear in a balance sheet?

3. J. B. Brown and L. C. Smith are partners, and in order to raise more capital and to preserve the organization they decide to incorporate. A company was duly incorporated under the name of The Eclipse Company, with an authorized capital of $800,000 divided into 8,000 shares of the par value of $100 each.

The partners agreed to sell for the sum of $800,000, payable in capital stock of the corporation at par, all rights to and title in the net assets of the partnership, exclusive of the cash, which was divided between the partners in proportion to their several interests at the time of the sale of the property.

According to the articles of partnership, Brown and Smith were equally interested in the assets, but the profits and losses were on a basis of 60% and 40% respectively.

The partnership balance sheet at the time of the sale was:

Assets Liabilities Land and Buildings $200,000.00 Notes Payable $100,000.00 Cash 10,000.00 Accounts Payable 40,000.00 Inventories 100,000.00 Brown’s Capital 210,000.00 Accounts Receivable 150,000.00 Smith’s Capital 210,000.00 Machinery and Equipment 100,000.00 ----------- ----------- $560,000.00 $560,000.00 =========== ===========

For the purpose of providing working capital, the partnership donated $300,000 of the capital stock to the corporation, which was sold at $50 per share.

You are required to:

(a) Close the partnership books, showing ledger accounts of partners only. (b) Open the corporation books. (c) Prepare a balance sheet of the corporation before sale of donated stock. (d) Prepare a balance sheet after sale of donated stock.

4. Before making the charges referred to below, the Profit and Loss account of a corporation for the year shows a credit balance of $60,000. The accounts receivable are $40,700, and the plant and machinery account is $55,000. The 6% preferred stock is $50,000, and the common stock $150,000. It is decided:

1. To provide out of the above-named profit and loss balance 7½% depreciation on plant and machinery. 2. To write off as uncollectible $1,500 of the accounts receivable, and to make a reserve of 2% of the remainder of the accounts receivable to provide for possible losses thereon. 3. To provide for the preferred stock dividend for the year. 4. To provide for a bonus of $7,500 to the employees. 5. To provide for a dividend on the common stock of 15% for the year. 6. To carry the balance then remaining on the Profit and Loss account to an Undivided Profits account.

Draft entries to comply with the above provisions.

5. A has $5,000 invested in a business. He sells B a half-interest for $3,000 and keeps the money. Make the entry.

6. Jones and Johnson form a copartnership, January 1, 19—, each investing $10,000. April 1, Jones pays in an additional $2,500, and Johnson draws out $1,500. August 1, Johnson pays in $3,000, and Jones withdraws $1,000. The profits for the year ending December 31, 19— are $5,000.

Prepare statements showing each partner’s investment and portion of profits, the profits being divided in proportion to capital invested and the time it is employed.

7. A, B, and C agree to start in business with a capital of $200,000, of which A is to furnish $100,000, and B and C $50,000 each. A is to have one half-interest in the business, and B and C each one-quarter. Interest at 5% is to be credited on excess, or charged on deficiency of capital. A contributes $100,000; B $45,000; and C $40,000.

How would the capital accounts stand on the books after adjusting the interest at the end of the year?

8. A and B are partners sharing losses and gains equally. A invested $3,000, and B invested $4,000. They are ready to wind up the business. The firm owes $5,000, of which $1,000 is due A and $500 is due B. They have $7,000 in cash.

Prepare the accounts showing the closing.

XXVIII

1. The cash book of the Chicago Grocery Company on December 31, 19—, shows a balance of $10,280.72 on deposit with the National City Bank of New York. The bank statement received by the firm as of the same date shows a credit balance of $9,707.15.

The firm finds that the following checks had not cleared:

Check 1264 $ 4.00 1329 52.80 1499 1,080.70 1510 108.07 1511 2,500.00 1512 3,281.70 1513 2,223.77 1514 100.80 1515 150.17

The bank statement also shows the following items not entered in the company’s cash book:

Charges: Telegram $ 1.80 Collection charges (5 items) 1.17 Check of Central Wholesale Grocery Co. 80.79

Credits: Interest on daily balance for December 8.18

The company had mailed to the bank a note, due December 31, payable to the National City Bank of New York and had taken credit for it in the sum of $10,000. The bank had not yet credited the item.

Prepare a reconciliation statement.

2. John Doe commenced business with a cash capital of $15,000. At the close of the first fiscal period the ledger accounts (except Cash and Capital) were: Accounts Receivable $4,312.50; Merchandise, debit balance $5,062.50; Accounts Payable $5,375; Expense $900. Doe’s net loss for the period was $2,775, and his sales were $50,000.

Prepare a statement of assets and liabilities and the profit or loss.

3. From the books of Messrs. Deas & Alexander, which are kept by single entry, the following balance sheet as at June 30, 19— was taken:

Assets Liabilities Cash in Bank and Accounts Payable $10,300.00 on Hand $10,800.00 Capital Accounts: Accounts Receivable 16,032.00 Deas $ 3,263 Inventories 29,980.00 Alexander 51,249 54,512.00 Buildings and ------- Equipment 8,000.00 ---------- ---------- $64,812.00 $64,812.00 ========== ==========

It was agreed that the partnership would be dissolved as at October 31 of the same year, but that Alexander would continue the business. It was further agreed that Deas would be paid the balance to his credit at June 30, 19—, together with a sum of $5,000 to cover his interest in the good-will of the business and his profit up to October 31, which latter was estimated at $1,200. From this amount, however, his drawings, amounting to $800, were to be deducted.

The following balances were shown on the books at June 30 of the next year: Cash in Bank and on Hand $8,310; Accounts Receivable $12,203; Inventories $29,143; Buildings and Equipment $8,103; Accounts Payable $8,706.

You ascertain that on April 30 of this year, merchandise valued in the books at $500 was destroyed by fire. As this loss was not covered by insurance, Mr. Alexander reduced the book value of his inventory to take care of the loss.

The additions to the buildings and equipment during the year cost $503, but the book value of these assets was reduced by the sum of $400 to take care of depreciation.

Alexanders personal drawings during the year amounted to $2,500.

You are instructed to prepare a balance sheet for Alexander as at June 30, 19—, a year after the balance sheet first given, together with statement showing profit or loss for the year and the distribution of same. You are also required to write up Alexander’s capital account for the year to June 30, 19—.

No value is to be placed on the good-will.

4. A machine costing $12,000 was estimated to have a life of twelve years with a residual value of $1,500. At the close of each year a charge of $875 was made to depreciation, and a like amount credited to “reserve” for depreciation. Just prior to closing the books at the end of the twelfth year the machine was discarded and sold for $2,000 (cash) and a similar machine was bought, costing $16,000. Show the journal entries you would frame to make the proper record.

5. What is the equated time for the payment of the balance of the following account (30 days to the month and 6% per annum)?

HENRY M. DOREMUS ========================================+======================= 19— | 19— Mar. 16 Merchandise, 4 months $444.57 | July 1 Cash $400.00 30 Merchandise, 60 days 376.82 | 20 Cash 375.00 Apr. 20 Merchandise, 30 days 712.19 | Aug. 16 Cash 700.00 May 17 Merchandise, 4 months 628.75 | 30 Cash 600.00 28 Merchandise, 4 months 419.31 |

Henry M. Doremus desires to settle the above account on September 13, 19—. What amount of money shall he pay?

APPENDIX C

MISCELLANEOUS PROBLEMS FOR SUPPLEMENTARY WORK

CONTROLLING ACCOUNTS

1. From the following data prepare controlling accounts. Indicate beside each entry its source book. Balance and close the accounts.

Sales $10,000. Purchases returns and allowances $200. Credit given customers for cash received $5,000. Purchases $16,000. Sales discount $180. Notes payable issued to creditors $8,000. Customers’ notes dishonored $100. Credit received for cash paid to creditors $4,000. Notes received from customers $1,000. Purchase discount $80. Bad accounts charged off $100. Freight prepaid on sales $60.

2. Journalize the following transactions:

(a) In our accounts receivable ledger there appears a debit balance in the account of John Smith amounting to $200, and in our accounts payable ledger there is a credit balance to him of $500. We send him a check for the balance due him, taking into consideration the cash discount allowed by us of 2%, and that granted by him of 3%. (The general ledger contains controlling accounts for these two ledgers.)

(b) Henry White owes us on open account $1,000, which is subject to 5% cash discount. He settles his account by giving us a note, which has included in its face interest for six months at 6%.

3. Draw up rough forms of a general journal, sales journal, sales returns and allowances journal, purchase journal, purchase returns and allowances journal, cash book, and note journals, as used in a controlling account system, and make entries of the following transactions therein:

(a) John Norman dishonors a note for $700 which you left at the bank for collection. The bank charges $1.50 protest fees.

(b) Amos Clark returns $50 worth of goods and asks for an allowance of $30 on goods retained. You accept the returned goods and grant the allowance.

(c) C. Cohen is both a customer and a creditor but you desire to carry his account in the creditors ledger only. You sell him a bill of goods, $350.

(d) An error was made last month in crediting customers’ remittances. James Jones was credited for $40 that should have been credited to John Jones. Correct the error.

(e) Settled your account of $800 with D. Flynn, a creditor, by returning goods $60, an allowance for defective goods $30, transferring a note you received from D. Morgan $570, and your check for the balance.

PARTNERSHIP—FORMATION

4. A has $5,000 invested in a business. He sells B a half-interest for $2,000, and places the money in the business. Make the entry.

5. X and Y bought merchandise to the amount of $12,000. X contributed $7,500; Y $4,500. They afterwards sold Z a one-third interest for $6,000. How much of this amount should X and Y receive respectively in order to make X, Y, and Z equal partners, assuming:

(a) Money paid into the business with no good-will. (b) Money paid into the business with good-will. (c) Money not paid into the business.

6. A and B carried on business in partnership and divided profits and losses in proportion to their capital, three-fifths and two-fifths, respectively. On January 1, 19—, A’s capital was $52,500, and B’s $35,000, as shown by a balance sheet of that date. They agreed to admit C as a partner from the same date on the following terms:

1. Assets and liabilities and capital to be taken as shown in the balance sheet. 2. $12,500 to be added to the assets for good-will. 3. The amount of good-will to be added to A’s and B’s capital in the proportion in which they divide profits. 4. C to pay to the partnership such a sum as will give him a one-fifth share in the business.

(a) State what amount of capital C has to bring in. (b) Set out the capital accounts of each partner in the new partnership. (c) State in what proportions the profits will be divided in the future, A and B, as between themselves, sharing in the same proportion as before.

7. New, Knott, and Moore are partners, sharing profits in the proportion of their investments. On December 31, 1920, the balance sheet of the partnership is as follows:

Assets Liabilities and Capital Cash $18,000.00 Accounts Payable $ 1,000.00 Other Current Assets 23,000.00 Moore, Capital 24,000.00 Fixed Assets 20,000.00 New, Capital 24,000.00 Knott, Capital 12,000.00 ---------- ---------- $61,000.00 $61,000.00 ========== ==========

Moore decides to retire from active business and agrees to sell his interest to the other two partners for $26,400, taking $14,400 in cash and the balance in three equal instalments payable July 2, 1921, January 2, 1922, and July 2, 1922, evidenced by notes payable.

The business is very prosperous, but it becomes increasingly evident that more capital is required, especially in view of the approaching maturity of the first note given to Moore. New and Knott decide to admit John Less as partner as of date July 1, 1921, at which time the current assets have increased by $16,000, accounts payable by $10,000, and the partners’ capital accounts by $6,000. They value the good-will at $12,000.

Less buys a one-third interest, but stipulates that all he pays must remain in the business and that the good-will shall not appear upon the books.

How much must he pay for the one-third interest? Present the balance sheet of the firm of New, Knott & Less as of July 1, 1921. (Ignore accrued interest on Moore notes.)

PARTNERSHIP—OPERATION

8. A, B, and C are partners. A is to receive a salary of $2,000 per annum, B $2,500, and C $3,000. The balance of profits, after payment of salaries, is to be divided as to the first $20,000, 2/3 to A, and 1/6 each to B and C; and profits above $20,000 are to be divided equally among the three. A retires from active business, and gives up his right to salary for 19—. The profits for the year, before charging salaries, amount to $35,000. To what extent are A, B, and C, respectively, affected by A’s concession?

9. A and B, partners, finding themselves in want of further capital in their business, and both being possessed of real property, A deposited deed with the bankers of the firm as security for a loan of $2,000 to the firm. B arranged on some of his own property a mortgage for $1,500 with a private friend and paid the proceeds into the firm’s bank account. The bankers were eventually obliged to realize the security held by them which produced, after payment of all expenses, the sum of $2,850.

Prepare entries recording these transactions in the firm’s books.

10. In making an audit of the books of the partnership of A and B, you find that the agreed division of profits was to be on the basis of the capitals and of the time that they were left in the business.

The books show as follows: A’s account paid in January 1, $6,000; March 1, $2,000; June 1, $4,000; November 1, $1,000; withdrew April 1, $3,000; October 1, $2,000.

B’s account, paid in January 1, $4,000; February 1, $1,000; August 1, $3,000; withdrew May 1, $2,000; December 1, $1,000.

Prepare a statement showing method of arriving at correct profit distribution.

11. Bull and Bear entered into partnership, Bull contributing $100,000, and Bear $75,000. Profits and losses were to be divided, Bull 60% and Bear 40%, and interest was to be allowed on capital at the rate of 6% per annum. The profits for the first two years (after charging interest on capital) were $19,600 for the first year, $22,400 for the second; and the drawings of the partners in excess of their salaries were, Bull $1,800 first year, $2,000 second year; Bear $2,000 first year, $2,400 second year.

At the end of the second year, Peak was admitted to partnership, and put into the business capital equal to Bull’s capital at the time, on the same conditions as to interest. Profits were to be divided on the basis of capital.

The profits for the third year were $30,000, and the partners’ drawings in excess of salaries were: Bull $2,000, Bear $2,500, and Peak $1,500.

Set up the capital accounts of the partners for each of these years, showing balance of each at the end of the third year.

PARTNERSHIP—DISSOLUTION

12. A, B, and C are in partnership. A invested $11,000; B invested $5,000 and C invested $1,200. Their agreement provides that profits or losses shall be divided as follows: A, ⁴/₉; B, ³/₉; and C, ²/₉.

The partnership has become insolvent and has therefore decided to dissolve. The cash value of assets is $10,000. The deficit is, therefore, $7,200. How should the assets be divided and how much money will each partner receive?

13. A, B, and C engage in business. A contributes $10,000 capital; B contributes $5,000; while C in lieu of any capital contribution agrees to undertake the active management at a salary of $3,000 a year, to be paid monthly.

After allowing 5% interest on capital, they are to divide the net result in the proportions of 5, 3, and 2 respectively.

At the end of eighteen months they ascertain the position to be unfavorable and decide to wind up. The assets realize $12,500; there are no liabilities except for capital and interest thereon and one month’s salary, due to C.

Make up the partners’ accounts showing the amount to be received by each.

14. Thompson and Murray are partners, sharing profits and losses equally. The partnership is dissolved December 31, 19—, at which time Thompson’s capital investment is $20,000, and Murray’s $7,000. Total liabilities are $55,000, included in which is $5,000 due Wilson on open account, and $7,000 due Murray on account. The whole of the assets had been disposed of for $60,000 cash by July 1 of the next year. Close the partnership books.

CORPORATION BOOKS

15. On June 1, 19—, the Home Manufacturing Company is incorporated under the laws of the state of New York to acquire and conduct the business of the firm of R. O. Browning and H. E. Johnson. The authorized capital stock of the company is $250,000, par value $100 per share. The company has agreed to take over the net assets of the partnership at the following valuation, and to issue in payment 1,000 shares of stock to each of the two partners: real estate $120,000; tools and equipment $60,000; raw materials $20,000. A bill of sale is executed and the stock duly issued. E. O. Kitchell and R. K. Taylor subscribe for 100 shares each. On June 10 the stock subscribed for by Kitchell and Taylor is paid for and issued. On June 14 Browning and Johnson each donate 100 shares of stock to the company to be sold for the purpose of securing additional working capital.

From the foregoing data, make: (a) the entries on the books of the partnership for the sale of the assets; (b) the opening entry of the new corporation.

16. A corporation is organized with an authorized capitalization of 5,000 shares at a par value of $100 each. One-half of the stock is subscribed for at 90 and paid for in two instalments. R. K. Reymer, in return for 1,000 shares of stock, transfers to the corporation his shipyard valued at $80,000. A. R. Paine receives 100 shares of stock for his services in organizing the corporation.

Make the necessary opening entries on the books of the corporation for the above.

17. F. H. Cole and R. D. Harris have patented an improved electric meter and have borrowed $1,500 on their note with which to complete the invention. They organize a corporation with a capital of $50,000, shares $100 each. Cole and Harris each receive $20,000 worth of stock in return for the patent rights transferred to the corporation. The corporation also assumes the payment of the $1,500 note. A. G. Emery, an attorney, is given five shares to pay for services in fulfilling the incorporation requirements. Cole and Harris each donate to the company $10,000 worth of stock to be sold in order to provide working capital; 160 shares of the donated stock are sold for cash at 50% of the par value.

Make the entries on the corporation books for the transactions given above.

18. The Bristol Manufacturing Company issued and sold on the 1st of January, 19—, to A and B (50 to each at the same price), first mortgage bonds of $500 each, bearing interest at 4% per annum, and received $48,000 in cash.

What records of the transactions should be made and in what books?

19. A corporation has an authorized capital stock of $100,000, of which $75,000 is outstanding.

This year’s profit and loss shows a profit of $4,125. The previous surplus balance is $20,150. They declare and pay an 8% dividend.

Show in journal form the entries covering the above.

20. A corporation’s profits for the year ended December 31, 19—, amount to $451,000. The by-laws require a reserve equal to 10% of any dividend paid to common stockholders, and any surplus remaining after such dividend has been paid is also to be applied to the reserve, until such reserve account amounts to $250,000. The reserve at December 31, one year before, was $156,020. The capital is $2,000,000, one-half cumulative preferred 6%, and one-half common, all fully paid. On December 31, 19—, the date first mentioned, the preferred dividend is two and one-half years in arrears. On December 31, one year before, the Profit and Loss account was in debt $202,000.

Set out your treatment of the profit for the year between these dates.

21. On April 1, 19—, the Healey Manufacturing Company is incorporated with an authorized capital of $100,000 common stock, and $50,000 preferred stock. The preferred stock is subscribed for and paid in full. One-half of the common stock is subscribed for, less 10% discount, the subscribers paying one-half in cash, the balance to be paid in two months. On June 1, the balance on the common stock subscribed for on April 1 is paid, and the remainder of the authorized common stock is sold for cash at 10% premium.

Make the entries required for the above transactions.

22. In auditing the accounts of a corporation for the current year, it was found that for the previous year the inventory had been undervalued $2,000; accrued wages $3,150, and rent receivable earned but not yet due $750, had not been taken into consideration. The surplus at that time, $25,000, is increased during the current period to $40,000. During the current year a piece of real estate owned by the corporation was sold at a profit of $5,000; a fire resulted in a loss of $10,000; accounts receivable that had been charged off as worthless were collected to the amount of $1,000. Dividends amounting to $15,000 were declared.

Bring the above transactions onto the books.

CASH AND PETTY CASH

23. On June 7, 19—, when balancing cash you found that you were over $153.75. Part of it was due to the following, which you corrected:

Duplicated an entry on the credit side for $12 paid for postage; an error of $10 in addition on the debit side, decreasing the total.

Not being able to locate any more errors, you make necessary entry to balance the cash book.

On June 15 you recalled a cash sale of merchandise $14.50 made on June 7 but not recorded.

On July 7 A. B. Potter returned your statement, saying he paid $75 on account June 7 which you had failed to credit him with.

Make the necessary adjusting entries.

24. (a) Show by journal entry the proper booking of the following transactions, indicating any items not to be posted:

1. Creation of a petty cash fund of $100.

2. Petty cash disbursements summarized: Office stationery and printing $35. Stamps and postage $30. Delivery expense $10. General expense $5. Repairs to furniture $15.

3. The petty cash fund is replenished.

(b) Set up the petty cash account in the ledger and show all postings to it.

25. The following balances are found on the books of a trading concern at the end of its first fiscal year:

Inventory Merchandise $ 4,312.09 Salaries 4,622.89 Capital Stock 10,000.00 Real Estate, Buildings, and Fixtures 17,500.00 Sales 8,469.10 Notes Payable (Merchandise Creditors) 5,000.00 Mortgage Bonds Issued 15,000.00 Customers’ Accounts 5,423.23 Accounts Payable (Merchandise Creditors) 2,436.28 Notes Payable, Bank 5,000.00

Total merchandise purchases as per invoices on file, less inventory, show the cost of merchandise sold to be 97% of sales. The cash at bank and in hand amounted to $1,302.14.

From the foregoing construct Cash account.

NOTES AND DRAFTS

26. Lang is in need of funds. Connelly, an associate of Lang, induces Moore to accommodate Lang. Accordingly, Connelly introduces Lang to Moore, for which Lang pays $500. Moore discounts for Lang a note for $15,000 due in three months and turns over to him $14,500.

Frame journal entries covering their interest.

27. X, a branch, buys from Y. Y draws on X for $2,000 at 60 days. The draft is accepted and is later discounted 40 days from maturity at 6% per annum. In addition to the above acceptances, Y holds a total of $15,000 acceptances from other customers; $12,000 of these are used as collateral for a loan of $10,000 at the bank.

State all necessary entries.

28. A corporation had discounted $25,000 of notes receivable that are not due until December 31, 19—. How should this be dealt with in preparing a balance sheet at November 30, 19—? One of the above notes for $5,000 was not paid at maturity but was protested, the protest fee amounting to $15. The company drew its check for the amount to take up the note.

State the entries required to be made on the books to record the transactions.

29. Previous to examining the accounts of a corporation at the end of its first fiscal year, you find that notes receivable stand in the financial statement prepared for the banker at $5,500.

Upon investigation it is disclosed that $20,000 of notes from customers were received during the period, and that $10,000 of these notes were duly paid in full by the customers to the company at maturity, and $5,000 of the notes were discounted at the bank. Of the notes discounted, a note for $500 given by Brown & Company was not paid when due, and has been charged back to the Notes Receivable account. Notes to the amount of $1,500 are not yet due at the bank.

Partial payments have been made to the company to the extent of $500 on notes still due, and these payments have been credited to an account called “Partial Payments on Notes Receivable.” This item is listed in the financial statement as a liability.

A customer’s note of $1,000 is found to have been given as collateral for the payment of a note of the company discounted at the bank.

A 30-day note given by an officer of the company for $200 is treated as a cash item. The note is 60 days past due.

You are asked to give the journal entry or entries for obtaining the proper account or accounts to record the above facts.

DEPRECIATION

30. An engine installed in a factory December 31, 19—, at a cost of $1,000, is replaced four years later by one of larger capacity costing (second-hand) $2,800. The discarded machine was sold for $900. The cost of making the change was $200. It has been the practice of the company to charge off 10% depreciation annually (on the diminishing basis), carrying the credit to a Depreciation Reserve account.

Make the necessary journal entries.

31. A manufacturing concern has annually for the past six years made provision at the rate of 10% per annum for depreciation of its plant and machinery, crediting the amount of such depreciation to a suitable Reserve account. During the year an engine which cost originally $5,000, was replaced by an improved engine costing $6,800. The cost of the new engine was charged to Machinery account at time of purchase. $300 was realized from the salvage of the old engine, this amount being credited to “Scrap Sales,” when received, and later closed to Profit and Loss.

Draft the adjustment entries which you consider necessary and explain the principle upon which these entries are based.

MERCHANDISE INVENTORIES

32. The average gross profits on sales of the Blank Corporation for the past five years have been 50%. During 19— the sales were $60,000. Purchases during the period were $50,000. In-freight and cartage was $3,000; returned purchases amounted to $2,500. At the beginning of the year the inventory was $20,000. It is estimated that current market prices are 10% above those at time of purchase.

What will be the cost of replacing the amount of stock on hand at the end of the year?

33. In examining a business for the two years ending December 31, 19—, it is found that an item amounting to $750 had been omitted from the initial inventory of the first year; that an error had been made in the footing of the final inventory of that same year, by which that inventory was overstated to the amount of $1,250; and that in pricing the final inventory of the second year, an error was made by which that inventory was understated to the amount of $1,500.

State fully the effect of these errors on the profit of each of the two years.

34. A certain trading corporation desires to prepare its financial statement as of September 30, 19—, but takes no inventory at that date. It has no perpetual inventory records, but the management states that the ratio of gross profit to net sales has remained substantially the same for many years, namely, 25%, and that the rate will remain the same for 19—.

The following information is given and you are asked to prepare a statement showing estimated inventory on hand September 30, 19—:

Inventory January 1, 19—, $6,100. Purchases $28,450. Freight-in $985. Freight-out $1,200. Allowances on sales $2,360. Sales $44,500. Discounts on purchases $960. Buying expenses $2,500. Sales salaries $3,000. General office expenses $4,000.

35. The ledger accounts of Henry James on December 31, 19—, showed: Accounts Payable $16,125; Accounts Receivable $13,188; Expense $2,450; Debit Balance Merchandise account $15,187. He started in business January 1, 19—, investing $45,000 cash. His total loss for the year was $8,074.50.

Prepare a statement of assets and liabilities and the profit and loss.

CONSIGNMENTS AND JOINT VENTURE

36. Indicate by journal entries how the following transactions should be recorded upon (a) the books of the consignor, and (b) the books of the consignee:

1. Shipment of goods costing $12,000 which are expected to be sold for $16,000. 2. Sale of three-fourths of such goods to sundry customers for a total of $15,000, only $5,000 of which is received in cash. 3. Return by customers of $55 of goods sold as defective in quality. 4. Advance of $4,000 to consignor by consignee, and payment of $100 freight, and $150 warehouse expense by the latter. 5. Settlement of all customers’ accounts except items totaling $200, which are written off as uncollectible. 6. Remittance to cover balance due consignor after consignee has deducted commission at the rate of 3% on the selling price of goods sold. (Account sales is rendered only when consignment is sold.)

37. On April 30, 1921, St. John & Company and Carpel Brothers enter into a joint venture agreement. They each contribute $4,000, with which they pay for goods that are shipped on May 1 to John Doe of San Francisco. St. John & Company advance $400 to defray freight and incidental expenses. John Doe, the consignee, is allowed 10% on the cost of the goods and is to sell them at whatever price he can obtain for them.

On June 1, 1922, on the strength of a report sent by wire, Carpel Brothers draw at sight on John Doe for $4,000 to the order of Carl Peter of New York. On July 1, 1922, St. John & Company receive from the consignee a check for $11,200, all the goods being sold; on the same day St. John & Company settle with Carpel Brothers. Interest at 6% is allowed on all transactions affecting the partners in the venture.

Prepare all the ledger accounts brought about by the above on the books of St. John & Company, including a joint venture account. (Construct your ledger accounts in such a manner that they will explain fully what took place and make a cross-reference possible.)

SINGLE ENTRY

38. The books of the Butter, Egg & Cheese Company, with an authorized and outstanding capital stock issue of $25,000, are kept by single entry.

It annually inventories all its assets and liabilities and from such inventory prepares a financial statement. At December 31, 19—, this inventory is as follows:

Office, Cash $ 1,584 Balance, Bank A 10,824 Accounts Receivable 29,521 10 shares in competing company 1,000 Plant and Equipment 64,938 Merchandise Inventory 21,737 Prepaid Expenses 5,081 Overdraft, Bank B 5,003 Accounts Payable 19,747 Mortgage Payable 25,000 Notes Payable 20,000

From a comparison of the financial statements at the beginning and the end of the year, you find that the item of “Plant and Equipment” is stated in an amount less by $11,460 than it was at the beginning of the year, plus additions during the year.

The financial statement for the beginning of the year showed a surplus of $35,703.

From your analysis of the disbursements and unpaid accounts at the beginning and end of the year, you find total purchases amounting to $661,910, and expenses for salaries, wages, supplies, repairs, etc., amounting to $120,115.

The purchases, however, included $450 paid out for John Smith, an employee, for which he has not reimbursed the company; and the total expense of $120,115 included $250 in the hands of a buyer as a working fund.

The inventory of merchandise at the beginning of the year was $18,125 and of prepaid expense was $2,653.

There was canceled on the customers ledger during the year $3,206 of uncollectible accounts.

There was paid for interest and discount on notes payable $1,061, and for interest on mortgage $1,500.

A 10% dividend was declared but not paid.

From the foregoing prepare: (a) a balance sheet as at December 31, 19—; (b) a profit and loss statement exhibiting net sales, cost of sales, and gross and net profit for the year.

INTEREST, DISCOUNT, AND PROPORTION

39. What single rate of discount is equivalent to the series 20%, 20%, and 15%? 50%, 25%, and 15%?

40. An invoice amounting to $1,000 reads: “Less 30%, 10%, and 5%. Terms 2/10, n/30.” It is dated January 19, 19— and paid January 28, 19—.

Explain and distinguish between these reductions of the list price. Give the amount of the check sent in payment of the invoice.

41. Keene owed Sharpe $2,000. Sharpe offered a discount of 5% cash. Not having the ready money, Keene discounted his note at the bank for 60 days at the rate of 6%, the note producing the sum required to discount Sharpe’s claim.

Calculate the amount of this note and make the necessary journal entries to take care of the entire transaction.

42. Equate the following account and find the cash balance due October 1, money being worth 7% per annum, 30 days to the month.

CHARLES L. BROWN =================================+================================== 19— | 19— Apr. 6 Mdse., 60 days 2,850.00 | Apr. 14 Cash 800.00 15 ” 90 days 1,475.00 | Returned Mdse. 125.00 28 ” 30 days 3,000.00 | July 6 Cash 1,000.00 | 17 Note, 30 days 1,000.00

43. A note for $2,500 dated September 15, 1920, bearing interest at 6%, had payments indorsed as follows: November 28, 1920, $750; May 6, 1921, $500; August 12, 1921, $300; January 18, 1922, $600.

Find the amount due May 8, 1922.

44. In a manufacturing concern the total value of property subject to insurance was $500,000, distributed as follows: assembling station $100,000; finished goods warehouse $200,000; raw materials warehouse $100,000; and the remainder on building. The annual insurance premium amounts to $18,890 per year.

Find the insurance burden chargeable to each department if the assembling room rate is 2½ times the raw materials warehouse rate; the finished goods warehouse, 80% of the rate of the assembling room and the manufacturing building rate, three times the assembling room rate.

INDEX

A ACCEPTANCE (See “Trade Acceptance”) ACCOUNTING, Function of, 4 Fundamentals, 7 Place of, in business, 3 Purpose of, 5 Relation to economics, 6 Relation to law, 7 Terms, 7 ACCOUNTS, 67-84 (See also “Classification of Accounts,” and special kinds, as “Controlling Accounts,” “Customers’ Accounts,” “Notes Receivable Account,” etc.) Analysis of, 477 Form, 478 Necessary to determine values, 40 Arrangement in ledger, 220 Asset, balance of account, 73 Averaging, 486 Balancing, 72, 107-110, 477-484 Capital stock, 338 (See also “Capital Stock, Account”) Chart, 75, 217-220 Current, 468-476 Form, 470 Adjustment, 469-471, 473, 476 Form, 470 Bank account as, 472-476 Date of value, 469 Defined, 468 Entries, 469-472 Interest charges on, 468, 469 Partnership, 469 Liability, Balance of account, 73 Mechanism of, 69 Mixed, 97-105, 215 Adjustment of, 237 Nominal, 216 Number of, 71 Real, 216 Sections, 69 Statement of, 190 Surplus, 338 (See also “Surplus Account”) “T” account, 528 Title of, 68, 72 Transferring, 110 Form, 112 ACCOUNTS PAYABLE, Controlling account, 269, 276 Debit and credit of, 89 Liability, 14 Relation to purchases and cash, 61 Summary, under controlling account system, 276 ACCOUNTS RECEIVABLE, Asset, 12 Balance sheet items, 26 Controlling account, 264, 276 Customers’ account as, 264 Debit and credit, 85 Ratio to sales, 65 Relation to sales and cash, 61 Summary, under controlling account system, 276 Valuation, 409 ACCRUED EXPENSES (See “Expenses”) ACCRUED INCOME (See “Income, Accrued”) ACCURACY, PROOF OF, Preliminary to closing entries, 221 ADJUNCT ACCOUNT, Defined, 103 ADJUSTMENTS, 115-131 (See also “Summarization”) Accounts current, 473, 476 Book entries, 237-244 Accrued expenses, 242 Accrued income, 241 Bad and doubtful accounts, 240 Deferred expenses, 241 Deferred income, 243 Depreciation, 240 Illustration, 245 Inventories, 238 Preliminary work, 221 Work sheet methods, 223, 224-230 Corporate, 359-365 Made in journal previous to ledger, 237 Trial balance, 483 ADMINISTRATION, 3 ADVENTURE ACCOUNTS, 460-467 Joint, 460 Accounting, 461-467 Interest charges, 468 Relation of parties, 460 Single, 460 ADVERTISING, Expenses, 47 AGENCY LAW, APPLIED TO CONSIGNMENT, 447 AGENT, 448 ALLOWANCES GRANTED TO CUSTOMERS, 45 Credits and returned goods invoices, 188 Debit and credit, 87 Journal, 253 Sales analysis of, 435 ANALYSIS, Account marked for, Form, 478 Ledger, 477-483 Procedure, 478 Sheet, 479 Form, 480 ANALYSIS PAPER, Used for work sheet, 221 ANALYTICAL JOURNALS, 163, 251-257 Form, 164 APPRAISAL (See also “Estimates,” “Valuation”) Defined, 103 Single-entry bookkeeping, 500 APPROVAL SALES, 442-444 ASSETS, Account, 213, 214 Adjusted at close of fiscal period, 215 Analysis of, 123 Balance of account, 73 Chart, 217 Debit and credit applied to, 85-90 Fixed assets, debit and credit to, 88 Classified, 11-13 Comparison, 34 Current, Balance sheet items, 26 Ratio of, to current liabilities, 27 Valuation, 407 Decrease covered by credit entry, 82 Described, 11-13 Fixed, Balance sheet items, 27 Capital and revenue expenditures, 104 Comparison, 35 Debit and credit to account of, 88 Depreciation account, 102, 123 Valuation, 124, 408, 413 Increase covered by debit entry, 82 Increase in value of, 94 Not subject to depreciation, Valuation, 413 Sale of in liquidation, 324 Subject to depreciation, Valuation of, 414 Valuation, 29, 407-419 ASSETS AND LIABILITIES, Balance sheet arrangement, 25 Changes in value of, 57, 77 AVERAGING OF ACCOUNTS, 486 Cash balance, 490 Compound equation, 489

B BAD DEBTS, Adjustment of entries, 240 Expense account for, 125 Expense item, 47 Handling of, 125 Valuation, 410 BAILMENT, DEFINED, 447 BALANCE SHEET, 22-37, 589 (See also “Trial Balance”) Forms, 23, 230, 232 Accounts receivable items, 26 Accrued expense item, 27 Arrangement, 24 Assets and liabilities, 25-30 Capital stock items, 344 Cash items, 25 Comparative, 32-37 Content and form, 35 Confusion of items, 58 Content, 22, 29 Corporation proprietorship, 20 Current assets, 25 Current liabilities, 26 Deferred charges item, 27 Equation of, 74-76 Fixed assets, 27 Information on, 24 Information lacking in, 39 Interrelation of, and profit and loss statement, 60-64 Investment items, 26 Not a part of books, 230 Notes receivable items, 26 Partnership proprietorship, 20 Preliminary to closing entries, 221 Problems, 403 Proprietorship, 8-10, 19, 40-43 Purpose, 22 Ratio of items, 64 Single-entry bookkeeping, 500 Statement of profit and loss, 41 (For other references see under “Statement of Profit and Loss”) Terminology, 23 Treasury stock on, 354 Valuation, 403-419 Based on correct analysis of accounts, 404 Rules, 407-409 BALANCING METHODS, 72, 73, 107-110, 477-484 Form, 109 Cash book, 151 Check figures in posting, 482 Errors, 482 Ledger analysis, 477-483 Form, 478, 480 Sheet, 479 Postings, 481 Red ink for, 108 Rulings, 108 Trial balance, 477 BANK, Account, Handling of, 370, 472-476 Interest on, 491 Opening of, 192 Agent for C. O. D. shipments, 190 Cash records, 366 Check book, 192, 194, 371 Deposit ticket, Form, 193 Discount, Calculation of, 492 Defined, 392 Draft, 180 Loans, 195 Methods, 192-198 Pass-book, 192, 194 BANKRUPTCY, CAUSE OF DISSOLUTION, 322 BETTERMENT, VALUATION, 416 BILL OF EXCHANGE, FOREIGN DRAFT, 181 BILL OF LADING, 188 C. O. D. shipments, 190 BINDINGS, LEDGER, 263 BONDS, Accounting, 355-357 Discount and premium, 355, 356 Interest payments, 356 Maturity, 356 Payable, liability, 15 Sale of, 355 Sinking funds, 357 Valuation, 412 BOOKKEEPING, Double-entry, 78 Single-entry, 495-512 Accrued and deferred items, 500 Balance sheet, 500 Books required, 496 Cash book, 497 Change to double, 502 Compared with double, 501 Debits and credits, 498 Inventory and appraisal, 500 Journal, 496 Ledger, 497 Net profit, 511 Opening entries, 504-511 Profit and loss statement, 499 Profits, 501 Proof of posting, 499 Proprietorship accounts, 498 Use of, 497 BOOKS (See “Journal,” “Ledger”) BRANCHES, Cash,372 Sales to, Handling of, 437 BROKER, DEFINED, 448 BUILDINGS, ASSET, 13 BUSINESS ORGANIZATION, 2, 16 BUSINESS PAPERS, DEFINED, 185 BUSINESS TRANSACTION, Accounting classification for, 216 Analysis of, 80, 98, 132, 251 Defined as to debit and credit, 79 BUYING (See “Purchases”)

C CAPITAL, Account, changes in, 93 Balance sheet, 19 Borrowed, account, 303 Defined, 15 Expenditures, 104 Invested, 15 Changes in, 93 Partnership, Accretions through profit, 301 Adjustments of, 297-300 Agreements concerning, 297, 558 Averaging investment, 292, 301 Interest on partners’, 294, 297-300, 316 Loans as distinguished from, 302, 317 Profit-sharing basis, 292 Sources, 297 Working defined, 26 CAPITAL STOCK, Account, 338-348 Certificate book, 337 Common, 338 Entries for, 346 Defined, 15 Discount and premium, Balance sheet item, 345 Entries for, 343 Donated (See “Treasury Stock”) Entries, Discount and premium, 343 On balance sheet, 344 On journal, 340 No-par value, 339 Entries for, 347 Preferred, 338 Dividends, 339 Entries for, 346 Subscriptions, Book and ledger, 336 Entries, 338-348 Instalment payments, 345 Payment by property, 348 Transfer book, 337 Treasury stock, 352-355 Valuation, 412 CAPITALIZATION, PARTNERSHIP, 297-304 CARD LEDGER, 263 CASH, Account, Cash journal replaces, 150 Debit and credit, 85 Asset, 11 Balance sheet item, 22 Bank account handling, 370 Branch funds, 372 Discount, Form, 400 Accounting, 156, 396-402 Defined, 392, 537 Elements of, 395 Entries, 398 Handling, 156, 396-402 Journal entries, 155 Trade acceptance and, 402 Handling of, 366-375 Internal control, 373 Paid for merchandise, determination of, 61 Payments compared to draft, 178 Petty cash account, handling of, 367 Petty cash book, 368 Form, 369 Received from customers, determination of, 61 Record, Bank, 366 Double, 366 Safeguarding, 373 Sales, handling, 436 Short and over, 151 Statement, 375 Total available balance, determination of, 473-476 Valuation, 409 CASH DISBURSEMENTS JOURNAL, 148 Form, 159 Analysis, 154 Columnar analysis, 161 CASH JOURNAL, 138, 147-161 Form, 149, 158, 159 Analysis, 154 Analytic, 255 Balancing, 151 Cash discounts, 155 Cash purchase and sales, 152 Cash short and over, 151 Check entries, 371 Posting from, 150 Replaces cash account, 150 Ruling, 151 Single-entry bookkeeping, 497 Summary, Form, 281 Under controlling account system, 280 CASH RECEIPTS JOURNAL, 147 Analysis, 154 Illustration of, 157-160 Posting from, 200 CERTIFICATE OF INCORPORATION, 332 CERTIFICATES OF STOCK, 337 CHARGE ACCOUNT, Handling of, 437, 444 Sales tickets, 187, 444 CHARTER, CORPORATE, 332 CHARTS, ACCOUNTS, 15 CHECK BOOK, 192, 194, 371 CHECK FIGURES IN POSTING, 482 CHECKS, Cash book entries, 371 Cashing of, 372 Classified as cash, 11 Described, 181 Handling of, 370 Spoiled, 371 CLASSIFICATION OF ACCOUNTS, 213-220 Assignment of account, 216 Basis of, 214 Business transaction, classified, 216 Chart, 217-220 Detailed, 217 Divisions, 213 Fundamentals of, 215 Purpose, 214 Three-group, 213, 216 Two group, 216 CLOSING Entries, Accuracy of proof preliminary to, 221 After adjusting, 245-250 Consignment sales, 456 Corporate, 359-365 Illustration, 247 Preliminary work to, 221 Profit and loss account, 249 Summarizing, 117-123, 214, 221 Work sheet, 221-230 Journal, 163 Journal entries, 167 Ledger accounting, 129-131 Merchandise records, 116, 121 C. O. D. SALES, 442 C. O. D. SHIPMENTS, 189 COLLATERAL, NOTES RECEIVABLE AS, 390 COLUMNAR, Adjustments, work sheet, 228 Cash books, Forms, 158, 159 Analysis, 154-161 Errors, 483 Journal, Form, 164 Analytic, 163, 251-263 Summary entries, 278 Form, 279 Purchase journal, 253 Sales journal, 251 Sales records, 434 COMMERCIAL DISCOUNT, DEFINED, 392 COMMERCIAL DRAFT, 180 COMMERCIAL PAPER (See “Negotiable Instruments”) COMMISSION AGENTS, 448 COMMISSION MERCHANT (See “Factor”) COMMISSIONS, Expense item, 47 Income from, 46 Salesmen’s, 445 COMMON STOCK, 338 Entries, 346 COMPARATIVE BALANCE SHEET, 32-37 Content and form, 35 COMPENSATION, PARTNERS, Out of net profit, 313 COMPOUND INTEREST, 485 CONDITION OF BUSINESS, Balance sheet, 25 Statements showing, 48 CONSIGNEE, Defined, 447 Inventory by, 456 CONSIGNMENT, Account, Account sales, 450 Closing of books, 456 Entries, 452-459 Expenses charged against, 450 Profit and loss, 453 Separate from others, 438, 449 Accounts by factor, collecting of, 452 Advantages, 452 Defined, 447 Goods in or out on, 431 Handling by, Broker, 448 Factor, 448-459 Inventory, Consignee’s, 456 Consignor’s, 454 Law, 447 Lien against, 450 CONSIGNOR, Defined, 447 Inventory by, 454 CONSOLIDATION, PARTNERSHIP, 310-312 CONTROL OF BUSINESS BY ACCOUNTING, 38 CONTROLLING ACCOUNT, Accounts payable, 269, 561 Summary, 276 Accounts receivable summary, 276, 561 Advantage of, 264 Cash journal summary, 280 Forms, 281 Credits, 268 Customers or accounts receivable, 265 Debits, 266 Defined, 264 Equilibrium of ledger changed by, 265 Errors, 483 Introduction of, into a system, 272 Journal summaries, 276-280 Forms, 279, 282 Note journal summary, 277 Posting, 270 Purchase journal summary, 276 Sales journal summary, 273, 278 Form, 279 Subsidiary ledger accounts, 282 Summaries, 265, 273-280 Forms, 278, 282 Withdrawals of stock-in-trade, 273 CORPORATIONS, Accounting, Closing books, 359-365 Current records, 351 Opening entries, 340-344 Advantages, 331 Bonds, 355-357 Books, 337 Minute book, 337 Stock certificate book and ledger, 337 Stock transfer book, 337 Subscription book and ledger, 336 Capital Stock, Account, 338 Common, 338 No-par value, 339 Preferred, 338 Certificate of incorporation or charter, 332 Closing of books, 359-365 Control by stockholders, 359 Defined, 330 Directors, 334 Disadvantages, 331 Dividends, 339 Growth of, 330 Incorporation, 332 Liability of stockholders, 351 Officers, 335 Opening entries, 340-344 Organization, 18, 331-336 Organization expense, Entries for, 340, 343 Partnership changed to, 348-350 Proprietorship, 335, 338 Balance sheet, 20 Surplus account, 338 Treasury stock, 352 Accounting, 353 CORRECTIONS, HOW MADE IN BOOKS, 243 COST OF GOODS SOLD, Analysis of, 436 Determining, 40-43, 117 Ledger adjustments, 117 Listed on statement of profit and loss, 50 COST VALUe, 404 CREDIT (See also “Debit and Credit”) Cash discount for goods sold on, 395 Returned goods as, 188 CURRENT ASSETS (See “Assets”) CURRENT LIABILITIES (See “Liabilities”) CUSTOMERS’ ACCOUNTS, Accounts receivable as, 264 Controlling account, 264 Debit and credit, 86, 266-269 Ledger, 265 Proving, 269 CYCLE OF OPERATIONS, 25

D DATA, LEDGER, 132-135 DATE DRAFT, 180 DATE DUE, AVERAGE, 486 DATE OF VALUE, 469 DEBIT AND CREDIT, 78 Accounts receivable, 85 Allowances granted to customers, 87 Asset account, 85-90 Cash disbursements journal, 148 Cash receipts journal, 147 Controlling account, 266-269 Customers’ accounts, 86, 266-269 Discount, 87 Fixed asset accounts, 88 Illustrations determining, 82-84 Journal entry, 134 Liability account, 85-90 Merchandise account, 87, 99 Mixed account, 97-105 Notes, 384 Notes payable account, 89 Posting from journals, 200 Principle of, 81 Proprietorship accounts, 91-96 Schedule, 82 Single entry bookkeeping, 498 Use of, 81 Work sheet adjustments, 221-230 DEBTS (See also “Bad Debts”) Listed on balance sheet, 25 DEFERRED CHARGES, Adjustment of entries, 241 Asset, 12 Balance sheet items, 27 Estimates of, 126 Single-entry bookkeeping, 500 Valuation, 408, 413 DEFICIT, PARTNERSHIP DISTRIBUTION, 318 “DEL CREDERE” AGENCY, 452 DELIVERY, Goods for future, 432 Accounting for sales at, 441 Goods ready for, 432 DELIVERY EQUIPMENT, ASSET, 13 DEMURRAGE COST, 550, 569 DEPARTMENT STORES, Approval sales, 442-444 Charge system, 444 Sales, 442 DEPARTMENTS, BUSINESS, 2 DEPLETION, 413 DEPRECIATION, Account, Fixed assets, 102, 123 Reserves, 103, 123 Adjustment of entries, 240 Assets not subject to, valuation, 413 Assets subject to, valuation, 414 Calculation of, 414 Expense item, 47 DIRECTORS, CORPORATE, 334 DISCOUNT, Bank, Calculation of, 492 Defined, 392 Cash, Form, 400 Accounting, 156, 396-402 Defined, 392, 537 Elements, 395 Entries, 398 Handling of, 156, 396-402 Trade acceptance and, 402 Cash journal entries, 155 Commercial defined, 392 Debit and credit of, 87 Defined, 392 Expense item, 47 Income from, 46 Note, Face value, 215, 382 Loan through, 195 Notes receivable, 384-387 Trade, Defined, 392 Methods, 393-395 Not recorded, 393 DISCOUNT AND PREMIUM, Bonds, 355, 356 Capital stock, balance sheet item, 345 Capital stock sold at, entries for, 343 DISSOLUTION, PARTNERSHIP, 321-329 (See also “Partnership”) DIVIDENDS, 339 Declaration of, 359 Liquidating, 567 Paid out of profits, 360 DOUBTFUL ACCOUNTS, Adjustment of entries for, 240 Estimate of, 124 Handling of, 125 Reserve for, handling, 410 Valuation, 410 DRAFT, Accepted discounted, 384-387 Bank, 180 C. O. D. shipment, 190 Commercial, 180 Compared with cash payments, 178 Date, 180 Defined, 175 Domestic, 180 Foreign, 180 Handling of, 176-179 Kinds of, 179 Sight, 179 Time, 180

E ECONOMICS, RELATION TO ACCOUNTING, 6 EMPLOYMENT DEPARTMENT, 3 ENTRIES, Accounts current, 469 Adjustment, 237-244 Basis of, 116 Illustration, 245 Merchandise records, 115-123 Necessity of, 115 Capital stock, 340-348 Cash discount, 155, 398 Cash receipts journal, 147 Closing, 116, 221-250 (See also “Closing Entries”) Illustration, 247 Consignments, 452-459 Corrections, 243 Cross-indexing for posting, 201 Form, 202 Draft, 177 Journal, 133 Adjusting, 167-172 Closing, 167-172, 359-365 Opening, 165, 340-344 Memorandum, 340, 341 Note journals, 379-383 Opening, Corporate, 340-344 Single system, 504-511 Purchase journal, 139-144 Sales journal, 144-146 Single, 495-512 EQUATING ACCOUNTS (See “Averaging of Accounts”) EQUATION, Balance sheet, 74-76 Ledger account, 74-76 Proprietorship, 8-10, 74 ERRORS, Cash short and over, 151 Columnar books and controlling accounts, 483 Corrected when discovered, 237 Posting, 200, 481 Transplacements, 211 Transposition of numbers, 209 Trial balance, 205-212 ESTIMATES (See also “Appraisal,” “Inventories,” “Valuation”) Depreciation reserve, 103 Doubtful accounts, 124 Prepaid and accrued expenses and income, 126 EXPENDITURES, Capital, 104 From petty cash fund, 367 Revenue, 104 Writing off, 407 EXPENSE ACCOUNT, Bad debts, 125 Chart, 219 Debit and credit to, 92-94 Proprietorship, 92 Treated as purchases, 254 EXPENSE BILL, Freight, 189 EXPENSE INVOICE, Entry and posting, 254 EXPENSES, Accrued, Adjustment of entries, 242 Balance sheet items, 27 Estimates of, 126 Liability, 14 Advertising, 47 Bad debts, 47 Classification of items, 58 Deferred, Adjustment of entries, 241 Estimates handling of, 126 Depreciation, 47 Discounts, 47 Incurred and unpaid, Handled as purchases, 254 Kinds of, 46 Liquidating, 324 Maintenance and repairs, 47 Non-operating, 46 Listed on statement of profit and loss, 52 Operating, 46, 94 Chart of accounts, 219 List on statement of profit and loss, 51 Organization, entries for, 340 Prepaid, handling estimates of, 126 Purchasing, 47 Rent, 47 Salaries, 46 Traveling, 46 Unpaid (See above under “Accrued”) EXPRESS MONEY ORDERS, 182

F FACE VALUE, Notes, 215, 382 FACTOR, Accounting, 448-459 Collecting of accounts by, 452 Compensation of, 452 Defined, 448 Duties, 449 Expenses, 450 Lien on consigned goods, 450 FEES, Income from, 46 FINANCE, 3 Purchasing and, 421 FINANCIAL STATEMENTS (See also “Balance Sheet”) Fiscal period for making, 48 Periodic, value of, 230, 236 Summary of results, 214 FISCAL PERIOD, Accounts at end of, 214 Financial statements, 48 FIXED ASSETS (See “Assets, Fixed”) FIXED LIABILITIES (See “Liabilities, Fixed”) FIXTURES, Asset, 13 FOOL-PROOF BALANCE, 477 FREIGHT BILL, 189 FREIGHT CLAIMS, 560 FREIGHT CHARGES, 565 Apportioning, 493 FREIGHT NOTICE, 189 FUNDS (See “Sinking Funds”) FURNITURE, Asset, 13 FUTURE DELIVERY, Accounting for goods sold at, 441 Inventory of goods sold at, 432

G GOOD-WILL, Dissolution of partnership, 328 Valuation, 418 GOODS (See “Merchandise”) GROSS PROFIT, Listed on statement of profit and loss, 50

H HORIZONTAL RULINGS, 434

I INCOME, Account, proprietorship, 92 Accrued, Adjustment of entries, 241 Single-entry bookkeeping, 500 Valuation, 413 Classification of items, 58 Deferred, Adjustment of entries, 243 Defined, 44 Estimates of, handling, 126 Kinds of, 44 Non-operating, 45 Listed on statement of profit and loss, 52 Operating, 44 Sources of, Commissions, 46 Discounts, 46 Fees, 46 Interest, 46, 127 Rentals, 46, 127 Sales, 45, 61 INCORPORATION (See “Organization”) INDEXING, Posting, 201, 552 Form, 202 Work sheet entries, 224 INDORSEMENT, Negotiable instruments, 183 INK, Use of red, 108 INSTALMENTS, Accounting, 439-441 Capital stock subscriptions, Entries for, 345 Contracts, 439 Distribution of proceeds by, during liquidation, 327 Sales on, 439-441 INSURANCE, Paid and deferred expenses, 126 INTEREST, Account, 128, 129, 383 Average due date, 486 Averaging of accounts, 486-490 Cash balance, 490 Compound equation, 489 100% method, 488 Balance sheet item, 26 Bank balances, 491 Bank discount, 492 Calculation, 195-198 Compound, 485 Cost, separate account for, 129 Date of value basis, 469 During construction period, Charged to assets, 407 Expense item, 47 Income from, 46, 127 Nature of, 485 On accounts current, 468, 469 On bonds, payment of, 356 On notes, 382 On partial payments, 491 On partners’ investment, 294, 297-300, 316 Partners’ loan, 317 Rate on partnership investment, 314 Simple, 485 INTERNAL CHECK, 373 INTERSTATE COMMERCE COMMISSION, Bill of lading, 188 INVENTORIES (See also “Estimates”) Consignee’s, 456 Consignor’s, 454 Entries, Adjustment, 238 Transferred to purchase account, 239 Goods for future delivery, 432 Goods in or out on consignment, 431 Goods in transit, 430 Goods ready for current delivery, 432 Goods received but not yet booked, 431 Mark-on, 425 Methods, 424 Perpetual formula, 424 Records for, 48 Retail system, 424 Single-entry bookkeeping, 500 Stock control card, 429 Form, 430 Valuation, 411 Methods, 239 INVESTMENTS, 550, 558 Asset, 12 Balance sheet items, 26 Partners’ interest on, 294, 298 Valuation, 294 INVOICE, Charge and cash sales, 187 Credit for returned goods, 188 Defined, 185 Expense, 254 Purchase, 186 Purchasing procedure, 422 Sales, 187 Charge account, 444 Statement of account, 190

J JOINT VENTURE, 460-467 JOINT-STOCK COMPANY, 288 JOURNAL, Form, 135 Analysis in, depends upon classification in ledger, 434 Analytic, 163, 251, 256 Form, 164 Cash, 138, 147-161 (See also “Cash Journal”) Closing, 163 Columnar records, 163, 251, 278 Form, 279 Defined, 133 Entries, Adjustment, 167-172, 237 Capital stock, 338-348 Cash discount, 398 Form, 400 Closing, 167-172 Debit and credit, 134 Opening, 165 Explanations, 163 Nature of, 133, 162 Note, 111, 255 Form, 113 Opening entries, 165, 340-344 Posting from, 163, 199-203 (see “Ledger, Posting”) Purchase, 138, 139-144 (See also “Purchase Journals”) Rulings, 251-257 Sales, 138, 144-146 (See also “Sales Journal”) Single-entry bookkeeping, 496 Special, 137 Subdivisions, 136-138 Subsidiary, 138, 144-146, 200, 251 Summary entries, Form, 279 Columnar books, 278 Use of, 162

L LAND ASSET, 13 LAW, Principal and agent, 447 Relation of accountancy to, 7 LEDGER, Accounts, Form, 70, 112, 113 Accounts payable, 269 Accounts receivable, 265 Arrangement of, 220 Classification, 213-220 (See also “Classification of Accounts”) Construction of, 74 Controlling, 264-271 Customers’, 265-271 Defined, 68 Equation of, 74-76 Subdivision, 257 “T” account, 528 Adjustment of current entries, 115-131 Analysis, 257, 477-484 Analysis sheet, 479 Form, 480 Balancing, 107-110, 477-484 Bindings, 263 Capital stock subscription, 336 Card, 263 Cash account, cash book replaces, 150 Changes in assets and liabilities recorded, 77 Closing, 129-131 Cost of goods sold, 117 Data, sources of, 132-135 Defined, 67 Entries, 111 Adjustment of, 237 Loose-leaf, 263 Open account, 204 Periodic work on, 106-131 Posting, 133, 199-203, 560 Form, 202 Cash journal, 150, 200 Check figures, 482 Controlling account, 266, 270 Cross-indexing, 201, 552 Errors in, 200 Expense invoices, 254 Explanatory matter, 203 Profit and loss account, 249 Proof by slip or reverse method, 481 Proof, in single-entry bookkeeping, 499 Purchase journal, 143, 200 Sales journal, 145, 200 Time for, 199 Profit and loss account, 129 Record, Insufficiency of, 132 Original or first, 132 Trial balance usage, 204 Rulings, 108, 111, 261 Form, 258-260, 262 Sales account, Posting, 160 Rulings, 434 Single-entry bookkeeping, 497 Subsidiary, 257 For controlling accounts, 283 Self-balancing of, 271 Trial balance, 106 (See also “Trial Balance”) Transferring accounts, 110 Form, 112 True financial condition reflected after adjusting entries, 244 LIABILITIES (See also “Assets and Liabilities”) Accounts, 213, 214 Balance of account, 73 Chart, 218 Debit and credit, 85-90 Classified, 14 Comparison, 34 Contingent, transfer of note, 384 Current, Balance sheet items, 26 Ratio of, to current assets, 27 Decrease covered by debit entry, 82 Described, 14 Fixed defined, 28 Increase covered by credit entry, 82 Note discounted as, 215 Valuation, 29, 419 LIEN, Factor’s on consigned goods, 450 LIQUIDATION, Partnership, 321-329 (See also “Partnership, Dissolution”) Value, 404 LIQUIDATOR, 324 LOANS, Accounts, partners’, 302 Bank, 195 Borrowed capital, 303 Capital accretions as, 302 Partners, 302, 317 LONG-TERM LIABILITIES (See “Liabilities, Fixed”) LOOSE-LEAF LEDGER, 263 LOSSES, Distributing a deficit, 318 Distribution of in partnership dissolution, 325

M MAINTENANCE EXPENSE ITEM, 47, 405 MARK DOWN, 425 MARK-ON, 425 MARK-UP, 425 MARKETING, 3 MEMORANDUM ENTRY, 340, 341 MERCHANDISE, Account, Adjustments, 115, 123 Analysis of, 100, 117 Assets subject to depreciation, 102 Content and significance, 87 Debit and credit, 87, 99 Mixed, 97-105 Summarization, 117-123 Adjustment of inventory entries, 238 Asset, 12 Average stock to be carried, 426 Cash paid for, determination of, 61 Control, 424, 426 Goods for future delivery, 432 Goods in or out on consignment, 431 Goods in transit, 430 Goods ready for current delivery, 432 Goods received but not yet booked, 431 On hand, balance sheet item, 26 Stock control card, 429 Form, 430 Valuation, 411 Withdrawal, entered in sales journal, 273 MERCHANDISE TRADING ACCOUNT, 364 MINING PARTNERSHIP, 289 MINUTE BOOK, 337 MIXED ACCOUNTS, 97-105, 215 Adjustment of, 237 MONEY (See “Cash”) MONEY ORDERS, 182 MORTGAGES, PAYABLE, LIABILITY, 14

N NAME OF FIRM, On balance sheet, 24 On statement of profit and loss, 49 NEGOTIABLE INSTRUMENTS, 173-184 (See also “Notes Payable”, “Notes Receivable”) Checks, 181 Draft, 175-181 Indorsements, 183 Kinds, 175 Money orders, 182 Trade acceptance, 181 Uses and requisites, 174 Warehouse receipts, 182 Writing of, 183 NET PROFIT, Determination of, 55 Under single-entry system, 511 Distribution of, 53 NET WORTH (See also “Proprietorship”) Balance sheet expansion, 40 Comparison, 32, 40 Shown under single-entry system, 500 NOMINAL ACCOUNT, 216 NO-PAR-VALUE STOCK, 339 Entries for, 347 NOTE JOURNALS, 111, 255, 379 Form, 113, 380 Entries, 379-383 Summary, under controlling account system, 277 NOTES, Accounting of, 379-391 Contingent liability incurred by, 384 Discounting, 384-387 Face value, 215, 382 Loan through, 195 Dishonored, 387-390 Face value, always entered at, 382 History of, 376 Interest on, 382 Liquidity of, 378 Relation of open account to, 377 Renewal, 390 NOTES PAYABLE, Account, Form, 113 Debit and credit, 89 Posting, 203 Rulings and entries, 111 Credits record, 384 Defined, 377 Liability, 14 Partner’s, 302 NOTES RECEIVABLE, Accepted draft, entries, 177 Account, Debit and credit, 85 Posting, 203 Rulings and entries, 111 As collateral, 390 Asset, 11 Balance sheet item, 26 Classification of, 390 Credits record, 384 Defined, 377 Discounted, 384-387 Dishonored, 387-390 Partial payments, 390 Use of, 173 Valuation, 409

O OBSOLESCENCE, 414 OFFICERS, CORPORATE, 335 OFFSET ACCOUNT, DEFINED, 103 100% METHOD, AVERAGING ACCOUNTS, 488 OPEN ACCOUNT, 204 (See also “Accounts, Current”) Liquidity of, 378 Relation of note to, 377 OPEN-TO-BUY ESTIMATE, 427 OPENING, Corporate books, 338-350 Entries under single-entry system, 504-511 Journal entries, 165 ORDERS, PURCHASE, 422 ORGANIZATION, 2 Corporation, 17 Expenses, Entries for, 340 Sale of stock charged to account, 343 Writing off, 406 Partnership, 17 Single proprietorship, 16 Types of, 16

P PARCELS POST, C. O. D. SHIPMENTS, 190 PARTIAL PAYMENTS, INTEREST ON, 491 PARTNERS, Compensation out of net profit, 313 Deceased, 323 Liability, 284, 287 Loans, 302, 317 New, admission of, 295, 305-310, 320 Nominal, 289 Notes payable, 302 Ostensible, 289 Profits, closing of, 318 Salaries, 316 Secret, 289 Silent, 289 Withdrawing, 319 Liability of, 321 PARTNERSHIP, 17 Accounts current, 469 Bankrupt, dissolution of, 322 Capital, Accretions through profit, 301 Adjustments of, 297-300 Averaging investments, 292, 301 Interest on partners’, 294, 297-300, 316 Interest rate on, 314 Investment, original, 294, 550, 558 Valuation of original investment, 294, 550, 558 Capitalization, 297-304 Consolidation, 310-312 Defined, 284 Dissolution, 321-329 By liquidation, 323 By mutual consent, 322 Causes of, 321 Deceased partner, 323 Distribution by instalments, 327 Distribution of losses, 325-327 Distribution of proceeds, 324 Good-will, treatment of, 328 Liquidation expenses, 324 Methods of, 323 On account of war, 322 Problems of, 322 Withdrawal of partner to admit new, 321 Illegal, dissolution of, 322 Incorporation, 348-350 Interest of new partner, 295 Joint adventure accounts, 460-467 Limited, dissolution of, 322 Liquidation (See above under “Dissolution”) Loans, Distinguished from capital, 302, 317 Interest on, 317 Mining, 289 New partners, methods of admitting, 295, 305-310 Organization, Characteristics of, 285 Classification of, 287 Contract, 286 Joint-stock company, 288 Nature of, 284 Partner’s loans accounts, 302, 316 Profit and loss account, 314-316 Profit-sharing, 290-294 Closing to partners’ accounts, 318 Distributing a deficit, 318 Interest on partners’ investment, 294 Investment average as a basis for, 292 Principles governing, 290 Ratio, 292, 301 Profits, 290-294, 313-320 Defined, 314 Determination upon admitting new partner, 320 Net, 314 Reserved, 317 Proprietorship, balance sheet, 20 Sale or transfer of, 322 Special, 287 Profit-sharing basis, 292 PERSONAL ACCOUNT, Changes in, 93 Posting, 203 Rulings and entries, 111 Form, 113 PERSONNEL DEPARTMENT, 3 PETTY CASH, Account, Handling of, 367 Vouchers, 367 Book, 368 Form, 369 P. M.’S, 446 POSTAGE, EXPENSE ITEM, 47 POSTAL MONEY ORDERS, 182 POSTAL SERVICE, C. O. D. SHIPMENTS, 190 POSTING (See “Ledger,” “Journal”) PREFERRED STOCK, 338 Dividends, 339 Entries, 346 PREMIUM (See “Discount and Premium”) PRINCIPAL AND AGENT, 447 PRODUCTION, 3 PROFIT (See also “Gross Profit,” “Net Profit”) As reserves, 360 Capital accretions through, 301 Corporate, handling of, 360 Defined, 313 Determined by single-entry system, 501 Dividends declared before distribution, 359 Dividends paid out of, 360 Net, 314 Net operating, 52 Partnership, 290-294, 313-320 Closing to partners’ account, 318 Defined, 314 Determination upon admitting new partner, 320 Distributing deficit, 318 Reserved profit, 317 Reserved, 317 Surplus, retained in the business, 301 Undivided, defined, 16 PROFIT AND LOSS (See also “Statement of Profit and Loss”) Account, Appropriation section, 318 Closing, 249 Closing profits to partners’ accounts, 318 Consignments, 453 Opening, 129 Partnership, 314-316 Posting, 203 Transfer of reserve profit, 317 Determination, 38-56 Liquidating partnership, 324-327 Relation to financial element, 57 Summary, 44-56 PROFIT-SHARING, Average investment as a basis for, 292 Partnership, 290-294 Ratio, 292, 301 PROMISSORY NOTES (See “Draft,” “Negotiable Instruments,” “Notes,” “Notes Payable,” “Notes Receivable”) PROOF, Postings, 481 Single-entry bookkeeping, 499 PROPERTY ASSET, 13 PROPORTION, 492-494 PROPRIETORSHIP (See also “Net Worth”) Accounts, 213, 214 Capital account, 93 Chart, 218 Debit and credit, 91-96 Defined, 91 Expense, 92-94 Income, 92 Ledger adjustments, 129 Personal account, 93 Single-entry bookkeeping, 498 Temporary, 129, 214 Vested, 93, 214 Balance sheet, 8-10, 19, 40-43 Corporations, 335, 338 Double-entry bookkeeping, 78 Equation, 8-10, 74 Kinds of, 15 Single, 16 Temporary records, 40, 42, 57 Valuation, 419 PURCHASE ACCOUNT, Adjustment of, 239 Transfer of inventory to, 239 PURCHASE DISCOUNT, 395 PURCHASE INVOICE, 186 PURCHASE JOURNAL, 138, 139-144 Analytic, 253 Expenses handled through, 254 Posting from, 143, 200 Summary, under controlling account system, 273 PURCHASES, Analysis of, 436 Buying, Average stock to be carried, 426 Buying quota, 427 Control methods, 426 Department, 421 Estimates, 426 “Open-to-buy,” 427 Financing, 421 Function, of buying, 420 Orders, 422 Policies, 426 Procedure, 422 Records, use of, 426 Requisition, 421 Returned, 436 Stock control card, 429 Form, 430 Successful buying, elements of, 423 Cash disbursements, journal, 152, 154 Cash paid for, 61 Expense item, 47 Transaction, analysis of, 139 PURCHASING AGENT, 422

R RATIO, Accounts receivable to sales, 65 Balance sheet and profit and loss statement, 64 Profit-sharing of special partnership, 292 Proportion, 492 Turnover, 64 REAL ACCOUNT, 216 RECEIPTS AND DISBURSEMENTS, STATEMENT OF, 375 RECONCILIATION OF BANK BALANCE, 472-476 RECORDS, Functions, 1 Kinds of, 39 RENEWALS, 405, 416 RENT, Expense item, 47 Income from, 46 Paid and deferred, 127 REPAIRS, Expense item, 47 Valuation, 405, 416 REPLACEMENTS, Defined, 405 Valuation, 416 REQUISITIONS, PURCHASES, 422 RESERVE, Account, Depreciation, 103, 123 Doubtful accounts, 125 Created from profits distinguished from valuation accounts, 318 Defined, 16 Depreciation, 103, 123 Doubtful accounts, handling, 410 Out of profits, 360 Reserve profits, 317 Sinking fund, 358 RETAIL TRADE, INVENTORY SYSTEM, 424 RETURNED GOODS, 45 Analysis of, in sales, 435 Crediting of, 188 Debit and credit of, 87 Journal, 253 Purchases, 436 REVENUE EXPENDITURES, 104 REVERSE POSTING, 481 RULINGS, Balancing an account, 108 Cash book, 151 Cash journal, 157-160 Form, 158, 159 Horizontal and vertical, 434 Journals, 251-257 Ledger, 261 Forms, 258-260, 262 Note accounts, 111 Form, 113 Personal Account, 111 Form, 113

S SAFEGUARDS, 373 SALARIES, Expenses, 46 Partners, 316 SALE VALUE, 404 SALES, Account posting from journal, 160 Analysis, 98, 434 Allowances, 435 Cash sales, 436 Consignments, 438 Instalment sales, 439 Returned goods, 435 Sales to branches, 437 Use of ticket in, 435 Approval, 442-444 Branches, 437 Cash, Handling of, 436 Receipts journal, 152, 154 Charge accounts, handling of, 437 Classification, 433 C. O. D., 442 Consignment, 438, 447-459 (See also “Consignment”) Department, 433 Department stores, 441 Discount, 155, 395 Income from, 45, 61 Future delivery, 441 Instalment, 439-441 Quota, 424, 427 Ratio of, to accounts receivable, 65 Returned goods, analysis, 435, 560 Ticket (See also “Invoice”) Charge and cash sales, 187, 444 Use of, in analysis, 435 SALES JOURNAL, 138, 144-146 Columnar analysis, 160, 252 Methods of recording, 252 Posting from, 145, 200 To customers’ accounts, 266 Returns and allowance journal, 253 Rulings, 434 Summary, Form, 279 Under controlling account system, 273, 278 Withdrawal of stock-in-trade, entered in, 273 SALES LEDGER, RULINGS, 434 SALES PRICE, TRADE DISCOUNT, 392, 393-395 SALESMEN, Commission, 445 Records, 446 SCHEDULES, Balance sheet, 577 Profit and loss, 589 Cost of goods sold, 590 SECURITIES, VALUATION, 412 SELF-BALANCING LEDGER, 270 SHIPMENT OF GOODS, Bill of lading, 188 C. O. D., 189 Freight notice, 189 Freight or expense bill, 189 Traffic department, 190 SIGHT DRAFT, 179 SIMPLE INTEREST, 485 SINGLE-ENTRY BOOKKEEPING, 495-512 (See also “Bookkeeping”) SINGLE VENTURE, 460 SINKING FUNDS, ACCOUNTING, 357 SLIP OR REVERSE POSTING SYSTEM, 481 SOLVENCY, HOW JUDGED, 27 “SPIFS,” 446 STATEMENT, FINANCIAL (See “Balance Sheet”) STATEMENT OF ACCOUNT, 190 STATEMENT OF PROFIT AND LOSS, 41, 44-56, 589 Forms, 49, 231, 234 Arrangement, 50 Operating expense section, 51 Trading section, 50 Confusion of items, 58 Content, 50 Equation, 52 Interrelation of, and comparative balance sheet, 60-64 Not a part of books, 230 Preliminary to closing entries, 221 Ratio of items, 64 Single-entry bookkeeping, 499 Title, 49 When drawn up, 229 STATEMENT OF RECEIPTS AND DISBURSEMENTS, 375 STATIONERY, EXPENSE ITEM, 47 STOCK (See “Capital Stock”) STOCKHOLDERS, Control by, 359 Liability of, 351 STOCK-IN-TRADE (See “Inventories,” “Merchandise”) SUBSCRIPTION BOOK, CAPITAL STOCK, 336 SUBSCRIPTION LEDGER, CAPITAL STOCK, 336 SUMMARIZATION (See also “Adjustments,” “Closing”) Accounts receivable and payable, Under controlling account system, 276 Book entries, 244-250 Cash journal, Form, 281 Under controlling account system, 280 Columnar books, 278 Form, 279 Merchandise records, 117-123 Note journals, Under controlling account system, 277 Preliminary to closing books, 221 Purchase Journal, Under controlling account system, 273 Purpose of, 214, 244 Sales Journal, Form, 279 Under controlling accounts system, 273, 278 Work sheet for, 221 SURPLUS, Account, 338 Defined, 16 Donated (treasury stock), 352-355

T TELEPHONE AND TELEGRAPH, EXPENSE ITEM, 47 TEMPORARY PROPRIETORSHIP RECORDS, 40, 42, 57 TERMS, 7 (See also “Discount, Cash”) TICKLER FILE, APPROVAL SALE, 443 TIME DRAFT, 180 TITLE, ACCOUNT, 68, 72 TRADE ACCEPTANCE, 181 Compared to cash discount, 402 Distinguished from notes, 377 TRADE DISCOUNT, Defined, 392 Methods, 393-395 Not recorded, 393 TRADING ACCOUNT, 364 TRAFFIC DEPARTMENT, DUTIES, 190 TRANSFER OF STOCK, BOOK, 337 TRANSFERRING AN ACCOUNT, 110 Form, 112 TRANSPLACEMENTS, ERRORS IN, 211 TRANSPOSITION OF NUMBERS, ERRORS OF, 209 TRAVELING EXPENSES, 46 TREASURY STOCK, 352 Accounting, 353 Purchase and sale, 353 TRIAL BALANCE, 106 Adjustment account, 483 Arrangement for work sheet, 224 Basis for balance sheet, 221 Classified, 220 Errors, 205-212 “Fool-proof,” 477 Methods, 204-212 Post-closing, 250 Work preliminary to, 107 TURNOVER, Rate, 64, 420

U UNPAID EXPENSES (See “Expenses, Accrued”)

V VALUATION, Account defined, 103 Accounts receivable, 409 Assets, 407-419 Subject to cost, 413 Subject to depreciation, 414 Bad debts, 410 Balance sheet, 403-419 Rules, 407-409 Betterments, 416 Bonds, 412 Cash, 409 Current assets, 407 Deferred charges, 408, 413 Doubtful accounts, 410 Fixed assets, 124, 408, 413 Good-will, 418 Income accrued, 413 Liabilities, 419 Merchandise or inventory, 411 Notes receivable, 409 Proprietorship, 419 Repairs and replacements, 416 Securities, 412 Stock, 412 VALUE, Cost, 404 Liquidation, 404 Sale, 404 VERTICAL RULINGS, 434 VESTED PROPRIETORSHIP ACCOUNT, 93 VOLUME OF BUSINESS, Records necessary to show, 39 VOUCHER SYSTEM, 254 VOUCHERS, PETTY CASH, 367

W WAGES, Expenses, 46 Paid and deferred expenses, 127 WAR, As a means of dissolving partnership, 322 WAREHOUSE RECEIPTS, 182 WORK SHEET, 221-230, 576 Adjustment entries, 223, 224-230 Analysis paper for, 221 Columnar adjustment, 228 Defined, 221 Illustration, 222-224 Indexing, 224 WORKING CAPITAL, Defined, 26 Turnover, 65

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