Accounting theory and practice, Volume 1 (of 3)

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

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

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

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

I

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

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

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

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

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

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

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

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

Ledger Accounts (40 pages)
General ledger, pages  1-27
Sales ledger,     ”   28-34
Purchase ledger,  ”   35-40

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

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

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

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

II

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

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

C. Allen Cotten
Balance Sheet, December 31, 19—

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

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:

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

IV

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

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

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:

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:

In the disbursements journal:

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

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

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

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

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

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

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

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

V

Summarized transactions for February were:

• Purchases:
• American Dry Goods Co., 2/10, 1/30, n/60, $13,487.92.
• Associated Dry Goods Co., 2/10, n/60, $13,562.70.
• Claflins, Inc., 2/10, 1/30, n/60, $10,897.80.
• U. S. Dry Goods Co., 3/10, 2/15, n/60, $12,247.80.
• Marshall Field & Co., 3/10, 2/15, n/60, $17,792.90.
• Cash purchases $2,987.50.
•  
• Sales:
• Arnold Sheriff & Co., 2/10, 1/15, n/30, $5,287.45.
• Atlas Dry Goods Co., 2/10, n/30, $5,794.32.
• Baird Dry Goods Co., 2/10, 1/15, n/30, $4,618.73.
• Burrows Dry Goods Co., 2/10, n/30, $3,289.49.
• Bostonian Dry Goods Co., 2/10, 1/15, n/30, $6,642.
• Century Dress Goods Co., 2/10, n/30, $4,497.35.
• Eagle Dress Goods Co., 2/10, n/30, $4,127.49.
• Emporium Dry Goods Co., 2/10, n/30, $4,793.80.
• Henry Miller, 2/10, n/30, $5,008.34.
• Melrose Dry Goods Co., 2/10, 1/15, n/30, $4,278.18
• New York Silk Co., 2/10, 1/15, n/30, $3,874.70.
• Southern Dry Goods Co., 2/10, n/30, $5,087.92.
• Public Bargain Store, 2/10, n/30, $4,972.
• Cash sales $2,989.90.
• Cotten took woolens, February 28, $50.
•  
• Journal:
• Goods were returned by Century Dress Goods Co. $340, and
• Southern Dry Goods Co. $845, as unsatisfactory.
• Made Public Bargain Store an allowance of $85.
• Analysis of the January freight bill showed that $147.60
• was paid for freight on sales.
• Returns to American Dry Goods Co. $978.
•  
• Cash Receipts:
• Baird Dry Goods Co., January bill $4,872.35 less 2%.
• Burrows Dry Goods Co., December bill $1,000 on account.
• Childs & Son January bill $4,794.12 less 1%.
• Daniel & Co., January bill $4,683.38 net.
• Eagle Dress Goods Co., January bill $5,978.35 net.
• Emporium Dry Goods Co., $1,000 on account.
• Arnold Sheriff & Co., February bill $5,287.45 less 2%.
• Atlas Dry Goods Co., February bill $5,794.32 less 2%.
• Bostonian Dry Goods Co., February bill $6,642 less 2%.
• Century Dress Goods Co., balance February bill $4,157.35 less 2%.
• Henry Miller, February bill $5,008.34 less 2%.
• Public Bargain Store, balance February bill $4,887 net.
• Cash was over $1.21.
• The note of Baird Dry Goods Co. for $1,500 was paid February 1
• with interest, amounting to $15.
• The note of Childs & Son was paid, $1,000.
• Sold miscellaneous ends, $48.50.
•  
• Cash Disbursements:
• Bentley, Gray & Co., January bill $5,694 less 2%.
• Claflins, Inc., January bill $12,639 less 2%.
• Miller & Rhoades, Inc., December bill $5,672 net.
• Wm. Taylor, Son & Co., January bill $1,897.42 less 2%.
• Salesmen’s salaries $2,000.
• Salesmen’s railroad fares, hotel bills, etc., $1,013.48.
• Chauffeurs’ wages $240.
• Garage rent $125.
• Shipping clerks $210.
• Gasoline and oil $75.60.
• Fine for stopping car in front of hydrant $10.
• Paper, wrapping supplies, crates, $308.30.
• Wooster withdrew $500 February 15.
• Advertising as per schedule $3,000.
• Freight and haulage bills $257.80.
• Rent for March $1,250.
• Lighting and heating bills $497.58.
• Office manager’s and clerks’ salaries $998.
• Stationery, mimeograph supplies, etc., $214.40.
• Wages of cleaners, watchman, repairs to windows
• and new steps at door, $874.50.
• Telephone and telegraph $175.80.
• Messengers $128.
• Bought five $1,000 U. S. Liberty bonds at 95½, with
• accrued interest of $59.88.
• Cotten drew $400; Wooster $500.
• U. S. Dry Goods Co., February bill $12,247.80 less 3%.

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

Instructions

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

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

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

Charge the $10 fine to Delivery Expense.

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

VI

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

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

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

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

VII

Summarized transactions for March were:

• Purchases:
• Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $8,942.50.
• Newcomb Endicott Co., 2/15, n/60, $7,414.
• U. S. Dry Goods Co., 3/10, 2/15, n/60, $7,609.40.
• Wico Mills, Inc., 2/10, 1/30, n/60, $8,337.80.
• Carter Dry Goods Co., 2/10, 1/30, n/60, $8,790.
• Bentley, Gray & Co., 2/10, n/60, $10,890.45.
• Marshall Field & Co., 3/10, 2/15, n/60, $10,219.
• Cash purchases $3,390.
•  
• Sales:
• Young, Smith, Field Co., 2/10, n/30, $6,874.32.
• Thompson Hudson Co., 2/10, n/30, $4,732.46.
• Rogers & Son, 2/10, n/30, $3,146.34.
• Public Bargain Store, 2/10, n/30, $3,590.70.
• National Dress Co., 2/10, n/30, $4,346.90.
• New York Silk Co., 2/10, 1/15, n/30, $6,784.50.
• Melrose Dry Goods Co., 2/10, 1/15, n/30, $7,894.80.
• T. H. Miller, 2/10, n/30, $6,237.40.
• Macmillian & Co., 2/10, n/30, $2,476.50.
• Hudson Dry Goods Co., 2/10, 1/15, n/30, $4,475.
• Falk & Taylor, 2/10, 1/15, n/30, $4,790.
• Eagle Dress Goods Co., 2/10, n/30, $3,105.
• Daniel & Co., 2/10, n/30, $3,490.70.
• Childs & Son, 2/10, 1/15, n/30, $4,789.40.
• Arnold Sheriff & Co., 2/10, 1/15, n/30, $3,980.40.
• Cash sales $2,462.75.
• Wooster drew merchandise $100.
•  
• Journal:
• Gave Marshall Field & Co. our 60-day 6% note due May 15,
• for their bill of February, $17,792.90 less 3%.
• Received merchandise returned by Melrose Dry Goods Co. $1,487.90.
• Returned goods to Associated Dry Goods Co. $416.90.
• Received a credit memo for $162.40 from Claflins, Inc.
• for spoiled goods.
• Macmillian & Co. gave us their 60-day 6% note, due May 25,
• for balance of January bill $4,207.50.
• Marquis Dress Goods Co. was allowed $485 for delay in transit.
• Out-freight for February was $139.86.
• Metropolitan Dry Goods Co. issued their 30-day 6% note,
• due April 15, for January bill $4,180.
•  
• Cash Receipts:
• Century Dress Goods Co. paid their note due March 28 with interest.
• Baird Dry Goods Co., February bill $4,618.73 less 2%.
• Burrows Dry Goods Co., February bill $3,289.49 net.
• Eagle Dress Goods Co., February bill $4,127.49 less 2%.
• Emporium Dry Goods Co., January bill $1,461.93 net.
• Marquis Dress Goods Co., December bill $2,795 net.
• Melrose Dry Goods Co., February bill $4,278.18 less 1%.
• T. H. Miller, December bill, $1,000 on account.
• National Dress Co., December bill, $1,000 on account.
• Southern Dry Goods Co., balance of February bill, $4,242.92 less 2%.
• Young, Smith, Field Co., March bill $6,874.32 less 2%.
• Thompson Hudson Co., March bill $4,732.46 less 2%.
• New York Silk Co., March bill $6,784.50 less 1%.
• Hudson Dry Goods Co., March bill $4,475 less 2%.
• Daniel & Co., March bill $3,490.70 less 2%.
• Childs & Son, March bill $4,789.40 less 2%.
• Arnold Sheriff & Co., March bill $3,980.40 less 2%.
• Rogers & Son, March bill $3,146.34 net.
• The receivers for Wilson Williams Co. declared March 15 an
• initial liquidating dividend of 35%, which was received.
•  
• Cash Disbursements:
• Salesmen’s salaries $2,000.
• Salesmen’s traveling expenses $1,896.42.
• Chauffeurs’ and shipping clerks’ wages $435.
• Garage rent $125.
• Gasoline, oil, and minor parts, $116.84.
• Crates, boxes, and packing materials, $412.80.
• Advertising as per schedule $3,000.
• Rent for April $1,250.
• Insurance policies, elevator, fire, plate glass, burglary, $550.
• Lighting and heating $512.90.
• Office salaries $1,872.
• Books, stationery, $226.40.
• Telephone and telegraph, postage, $896.40.
• Changing partitions $280.
• Wages of cleaners and watchman $490.
• Painting of partitions $28.
• New bell on elevator $18.75.
• Contribution to Salvation Army Drive $100.
• Cotten drew $400; Wooster $500.
• Cash was short $12.92.
• Freight bill $262.90.
• American Dry Goods Co., balance of February bill $12,509.92 less 2%.
• Associated Dry Goods Co., balance of February bill $13,145.80 less 2%.
• Claflins, Inc., balance of February bill $10,735.40 less 2%.
• Miller & Rhoades, January bill $2,689.40 net.
• Marshall Field & Co., March bill $10,219 less 2%.
• Paid Marshall Field & Co. and American Dry Goods Co.
• December notes with interest.
• Lent $5,000 to Woolsey, in return for which he issued to the
• order of the firm his six months’ 6% note for a similar amount.

Instructions

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

Enter the Woolsey note in the proper account.

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

VIII

Summarize the subsidiary journals.

Post completely.

Take a trial balance of the general ledger as of March 31.

Prove the totals of the subsidiary accounts against the totals of their respective controlling accounts.

IX

Summarized transactions for April were:

• Purchases:
• American Dry Goods Co., 2/10, n/60, $8,292.50.
• Associated Dry Goods Co., 2/10, n/60, $7,784.90.
• Claflins, Inc., 2/10, 1/30, n/60, $10,467.70.
• Miller & Rhoades, Inc., 2/10, 1/30, n/60, $6,742.80.
• U. S. Dry Goods Co., 3/10, 2/15, n/60, $8,276.40.
• Marshall Field & Co., 3/10, 2/15, n/60, $28,450.
• Wico Mills, Inc., 2/10, 1/30, n/60, $4,970.80.
• Cash purchases $1,988.75.
•  
• Sales:
• Arnold Sheriff & Co., 2/10, 1/15, n/30, $7,145.90.
• Atlas Dry Goods Co., 2/10, n/30, $6,890.70.
• Baird Dry Goods Co., 2/10, 1/15, n/30, $7,294.60.
• Bostonian Dry Goods Co., 2/10, 1/15, n/30, $9,874.50.
• Century Dress Goods Co., 2/10, n/30, $4,927.90.
• Daniel & Co., 2/10, n/30, $7,847.40.
• Hudson Dry Goods Co., 2/10, 1/15, n/30, $8,475.90.
• Henry Miller, 2/10, n/30, $5,982.90.
• Rogers & Son, 2/10, n/30, $7,826.90.
• Southern Dry Goods Co., 2/10, n/30, $7,495.80.
• Thompson Hudson Co., 2/10, n/30, $6,475.80.
• Young, Smith, Field Co., 2/10, n/30, $5,162.70.
• Cash sales $1,920.80.
•  
• Journal:
• Returned to Marshall Field & Co., $1,250 worth of merchandise
• of the February purchase, cash adjustment effective as of
• April 15 to be made at time of paying note.
• Returned goods to Miller & Rhoades, Inc., $650.
• Transferred a desk costing $125 from the office to the sales
• department of store.
• Received returned goods from Bostonian Dry Goods Co.,
• $1,090; and from Henry Miller $785.
• Received a 30-day 6% note from the Silk & Dress Goods Exchange
• for January bill $3,780.40, due May 23.
• Out-freight for March was $152.90.
• The failure to book a payment of $10 for repairs on an
• annunciator partly explained the cash shortage in March.
•  
• Cash Receipts:
• Note of Metropolitan Dry Goods Co. for $4,180 was paid
• April 15, with interest.
• Burrows Dry Goods Co., balance of December bill, $1,000.
• Eagle Dress Goods Co., March bill $3,105 less 2%.
• Emporium Dry Goods Co., February bill $4,793.80 net.
• Falk & Taylor, March bill $4,790 less 2%.
• Macmillian & Co., March bill $2,476.50 less 2%.
• Marquis Dress Goods Co., balance of January bill $3,782.50 net.
• T. H. Miller, March bill $6,237.40 less 2%.
• Melrose Dry Goods Co., balance March bill $6,406.90 less 1%.
• New York Silk Co., February bill $3,874.70 net.
• National Dress Co., on account, December bill, $1,000.
• Arnold Sheriff & Co., April bill $7,145.90 less 2%.
• Baird Dry Goods Co., April bill $7,294.60 less 2%.
• Hudson Dry Goods Co., April bill, $8,475.90 less 2%.
• Southern Dry Goods Co., April bill $7,495.80 less 2%.
• Thompson Hudson Co., April bill $6,475.80 less 2%.
• Young, Smith, Field Co., April bill $5,162.70 less 2%.
• The firm discounted its 90-day 6% note, due July 15,
• at the Merchants National Bank for $5,000.
• The receivers for Wilson Williams Co. declared another
• liquidating dividend of 15%.
• Received from the railroad $25, an overcharge on demurrage.
•  
• Cash Disbursements:
• Sales salaries $2,975.
• Salesmen’s traveling expense $2,243.60.
• Delivery expense $763.87.
• Packing supplies $513.90.
• Advertising for April $3,000, and for May $3,000,
• less $250 as discount for prepayment.
• Freight bills $297.60.
• Light and heating $212.50.
• Office salaries $2,140.
• Office supplies $365.70.
• Office expense $988.95.
• General expense $897.12.
• Rent for May $1,250.
• Bentley, Gray & Co., March bill $10,890.45 less 2%.
• Wico Mills, Inc., March bill $8,337.80 less 2%.
• U. S. Dry Goods Co., March bill $7,609.40 less 2%.
• Wm. Taylor, Son & Co., March bill $8,942.50 less 2%.
• American Dry Goods Co., April bill $8,292.50 less 2%.
• Claflins, Inc., April bill $10,467.70 less 2%.
• Newcomb Endicott Co., March bill $7,414 less 2%.
• Miller & Rhoades, Inc., balance of April bill, $6,092.80 less 2%.
• Woolsey withdrew April 30 $500; Cotten, $400; and Wooster $500.
• New adding machine and desks for office $500.
• Paid taxes $190.

Instructions

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

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

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

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

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

X

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

Post completely.

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

Prove the subsidiary accounts against their respective controlling accounts.

XI

1.  Summarized transactions for May were:

• Purchases:
• Bentley, Gray & Co., 2/10, n/60, $9,764.90.
• Carter Dry Goods Co., 2/10, 1/30, n/60, $29,417.70.
• Newcomb Endicott Co., 2/15, n/60, $10,846.40.
• Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $9,497.50.
• Marshall Field & Co., 3/10, 2/15, n/60, $11,145.80.
• Cash purchases $1,872.45.
•  
• Sales:
• Arnold Sheriff & Co., 2/10, 1/15, n/30, $9,465.80.
• Baird Dry Goods Co., 2/10, 1/15, n/30, $8,467.90.
• Century Dress Goods Co., 2/10, n/30, $9,748.80.
• Daniel & Co., 2/10, n/30, $7,492.40.
• Hudson Dry Goods Co., 2/10, 1/15, n/30, $9,948.30.
• New York Silk Co., 2/10, 1/15, n/30, $9,742.50.
• Silk & Dress Goods Exchange, 2/10, n/30, $9,865.80.
• Southern Dry Goods Co., 2/10, n/30, $10,480.
• Thompson Hudson Co., 2/10, n/30, $8,942.75.
• Young, Smith, Field Co., 3/10, n/30, $16,290.
• Cash sales $1,694.90.
•  
• Journal:
• Young, Smith, Field Co. returned $1,985 worth of merchandise;
• and Century Dress Goods Co., $625 worth.
• Out-freight for April was $147.42.
• Received from the National Dress Co., a 60-day acceptance drawn
• on the United Textile Co. in favor of the firm, due July 15,
• for $5,000.
• Returned to Newcomb Endicott Co. $2,200 of merchandise.
• Gave Associated Dry Goods Co. our 90-day note dated May 15,
• non-interest-bearing, but with 90 days’ interest, $114.43,
• included in the face, for their bill of April $7,784.90
• less 2% cash discount.
• Marshall Field & Co. note adjusted.
• Final settlement of Wilson Williams Co. was effected May 15.
• (See “Cash Receipts.”)
• Due to temporary embarrassment of the Silk & Dress Goods
• Exchange, their note was extended one month.
•  
• Cash Receipts:
• Arnold Sheriff & Co., May bill $9,465.80 less 2%.
• Atlas Dry Goods Co., April bill, $3,000 on account.
• Baird Dry Goods Co., May bill $8,467.90 less 2%.
• Bostonian Dry Goods Co., balance of April bill,
• $8,784.50 less 2%.
• Century Dress Goods Co., April bill, $2,500 on account.
• Daniel & Co., April bill, $5,000 on account.
• Hudson Dry Goods Co., May bill $9,948.30 less 2%.
• New York Silk Co., May bill $9,742.50 less 2%.
• Public Bargain Store, March bill, $2,500 on account.
• Southern Dry Goods Co., May bill $10,480 less 2%.
• Young, Smith, Field Co., balance May bill, $14,305 less 2%.
• Interest on Liberty bonds due May 15, $119.75.
• Cash was over $42.65.
• For use of one of the motor trucks for the week,
• $100 was received.
• Sold packing materials, $80.75.
• Macmillian & Co., paid their note with interest May 25.
• Received $275 from the Central Hudson Railway Co. on our claim
• made in January.
• The receivers for Wilson Williams Co. paid a final liquidating
• dividend of 10%.
•  
• Cash Disbursements:
• Salesmen’s salaries $2,985.
• Salesmen’s traveling expenses $2,213.72.
• Delivery expenses $886.94.
• Shipping and packing materials and supplies $516.70.
• Advertising for June $3,000 less $250 discount for prepayment.
• Rent for June $1,250.
• Freight and haulage $467.90.
• Lighting and heating $186.40.
• Office salaries $2,040.
• Office supplies $240.60.
• Office expense $1,167.70.
• General expense $912.67.
• A contribution of $250 was made to the State University fund.
• Paid Marshall Field & Co. note May 15 with interest
• and adjustment.
• Newcomb Endicott Co. balance of May bill, $8,646.40 less 2%.
• Cotten withdrew May 15, $400; Wooster $500; and Woolsey $1,000.
• Carter Dry Goods Co., March bill $8,790 net.
• Wico Mills, Inc., April bill $4,970.80 less 1%.
• U. S. Dry Goods Co., April bill $8,276.40 less 2%.
• Wm. Taylor, Son & Co., May bill $9,497.50 less 3%.
• Marshall Field & Co., May bill $11,145.80 less 2%.

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

Balance Sheet of Brown & Towne
July 1, 19—

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

(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.