CHAPTER LIV. Illustration of Single Entry

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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