Instead of the student’s practice work appearing at the close of each chapter of the text as in Volume I, it has seemed best in this volume to place this material in a separate appendix at the end of the text because of the impracticability of dividing the text matter into uniform sections with one or two chapters constituting a lesson assignment. In some classes more practice work may be undertaken than in others. The practice work is, however, laid out in fairly uniform portions and it is expected that the student will be able to handle one practice assignment for each hour of class work. Thus, if the lecture period is of two hours’ duration, two assignments of work should be set.
The practice work is given in three parts. Appendix A will be found to contain sufficient material for the first semester of approximately 30 hours of lecture work. This appendix, in the main, is comprised of a formal set of accounts relating to a manufacturing corporation, to be worked out with suitable blanks. A few miscellaneous problems bearing particularly on some portions of the text are also provided. Appendix A should be covered in connection with the first twenty-seven chapters of the text.
Appendix B contains a series of well-graded problems more or less closely connected, illustrating, by means of its method of keeping accounts, the growth of the business. Single entry is changed to double entry, a simple trading business into a complex manufacturing concern, and many of the problems peculiar to such types of business organization are incorporated. Some unrelated problems illustrating special forms of statements, combinations, capitalization, and the consolidated balance sheet are also included.
Appendix C contains a group of unrelated, miscellaneous problems, taken mostly from C. P. A. examinations. These can be used to supplement the assignments from Appendices A and B and to give variety to the work during succeeding years.
I
Problems
1. J. B. Rogers and B. R. Jay, owners of similar businesses, agree to consolidate under a partnership agreement whereby each turns over his business as it stands, subject to the liabilities shown, and the deficient partner contributes sufficient cash to equalize their capitals. Rogers’ standing is: cash $750; merchandise $3,900; notes receivable $1,000, with interest accrued on same $10.25; accounts receivable $750, estimated as worth $725; furniture $975; notes payable $1,000, being his personal non-interest bearing note at 60 days discounted at 8% with 20 days yet to run; accounts payable $325. Jay’s standing is: cash $365; merchandise $4,500; accounts receivable $1,350, guaranteed as good; furniture $825; delivery equipment $325, valued at $300; accounts payable $265; notes payable $1,200, with accrued interest of $8.69; salaries earned but unpaid $50. The furniture in each case is taken in at its face value.
Make the opening journal entry and balance sheet for the new firm. Make journal entries for each partner to close his old set of books.
2. From the following information take a trial balance, make closing journal entries and summary statements as of December 31.
Notes receivable on hand $3,000; accounts receivable $7,500; notes payable $2,100; accounts payable $4,600; real estate $6,000; plant and machinery $8,000; rent and taxes $600; general expense $2,000; salaries $1,500; wages $600; freight $150; duty $200; cash on hand $150; cash in bank $1,800; bad debts written off $140; goods on hand at beginning of year $9,500; purchases $26,000; sales $40,000; interest paid $210; furniture $600; Jas. Buckham, partner, invested $10,000, withdrew $1,450; E. J. Cockburn invested $14,000, withdrew $1,300; the merchandise on hand is valued at $9,000; rent unpaid $250; insurance unexpired $140; interest accrued on notes receivable $25; wages accrued $115. Allow 10% depreciation on plant and machinery, and 12½% on furniture. Estimate losses from bad debts as 5% of accounts and notes outstanding. Losses and gains are divided ⁴/₇ to Cockburn and ³/₇ to Buckham. Interest on capitals at 6% is to be allowed.
3. At the end of the first year of a partnership, Wilson has an interest of $18,000 and Peters of $9,000, each drawing profits in proportion to his capital.
They decide to admit Johnson into the partnership, selling him a one-quarter interest, valuing their good-will at $3,000. Under the conditions named, in what two ways may Johnson secure his interest? What will be the amount of his investment in each case?
Instructions
Problem 1. The student is referred to Volume I, pages 458-459, where a similar problem is illustrated.
Problem 2. See Volume I, pages 285-286.
II
Problems
1. The Ibex Manufacturing Co. is incorporated with an authorized capital stock of $500,000 common and $250,000 6% preferred; $150,000 of the preferred is subscribed for and paid in full. One-half of the common is subscribed for and 50% paid in, the balance to be paid in five monthly instalments. The remaining preferred stock is later subscribed for at 101 and 50% paid, and half of the remaining common is subscribed for at 90 and paid in full. After operating for six months the remaining common is sold at 102 to provide funds for enlargement, one-half paid in cash and the balance in one month. Balance of preferred subscriptions are paid in cash. Show all the above transactions by means of journal entries.
2. At the close of the first year, the Ibex Manufacturing Co., being short of ready funds and not desiring to extend its credit further, secures from its stockholders a donation of $50,000 common and $10,000 preferred, one-half of which is immediately sold at 90 and 101 respectively. At the end of the second year the remainder of the donated stock was disbursed to the stockholders as a dividend, net profits for the year amounting to $45,000. Journalize all the above transactions, showing ultimate disposition of the working capital.
3. The Smith Brooks Publishing Co. has a capital stock of $750,000, of which one-third is 6% cumulative preferred stock. The company has a surplus of $65,000. It has an outstanding bond issue of $200,000 at 4½% interest. The profits for the year are $61,392.75. No profits have been distributed for three years. The directors pay the bond interest, declare a 3% dividend on common, and carry $7,500 to the sinking fund. Bring all of the above onto your books.
4. A corporation has been formed with an authorized capital stock of $200,000, one-fourth of which is 7% cumulative preferred. The entire issue of preferred is subscribed for at par and 50% paid in. When the balance is paid, one share of common is to be given as a bonus with every five shares of preferred. The promoter of the company is given $15,000 in common for his services. The company paid cash $250 for a set of stock records; $25 for corporate seal; $500 for lawyer’s fees in incorporating; $250 for state charter, and $375 for sundry expenses in organizing. $75,000 of the common stock has been subscribed for at par to be paid in five monthly instalments. The balance has been paid on the preferred stock and three instalments on the common. Make journal entries covering the above transactions.
Instructions
For the opening entries of a corporation, the student is referred to Volume I, Chapter XLIX, in addition to Chapter I of the present volume.
Problem 1. Make entries covering the five monthly instalments.
Problem 2. Assume that no preferred dividend was paid during the first year.
III
Problems
1. Draw up a form of voucher check suitable for a professional man.
2. Draw up a form of voucher check suitable for a trading concern.
3. Draw up a form of voucher register for a manufacturing concern desiring to segregate manufacturing, trading, and general expenses under which there are twelve, ten, and fifteen subdivisions of expense, respectively. Provide for other possible expenditures. Treat purchase discounts as a reduction of cost price.
4. Using the voucher register you drew up for Problem 3, from your own data make at least one entry in each column and three in the Sundries column. Show the register footed, closed, and posted.
5. What change would you make in the form of a voucher register in order to treat purchase discount as a financial management item?
6. Using your own data for a purchase ledger in which there are at least six open accounts, show the entries necessary to close it and open a voucher register to take its place.
Instructions
See Chapter II where all these points are discussed.
IV
Problem
Caxton & Dolton began business January 1, 1916. Caxton invested $12,000, and Dolton invested $11,000. May 1, 1916, Caxton withdrew $3,000, and Dolton invested $1,000. July 1, 1917, Evans was admitted to the partnership, investing $8,000. October 1, 1917, Evans invested $4,000 more, and Dolton withdrew $2,000. July 1, 1918, Dolton and Evans purchased Caxton’s interest in the business. On that date their books showed the following financial condition: cash $19,364.50; merchandise $17,500; notes receivable $10,000; accounts receivable $8,945; interest receivable $248.50; real estate $6,500; accounts payable $14,000; notes payable $5,130; interest payable $167.40; accrued expenses $325.60. For the purpose of the sale good-will was estimated at $5,000; depreciation on real estate 5%; bad debts at 3% of the outstanding notes and accounts. Each partner was to share in profits on the basis of capital and the length of time the capital was invested. Of the purchase price of Caxton’s share, Dolton and Evans were to pay such amounts respectively as would make their new capitals equal. Set up the partners’ ledger accounts and show all entries to them in order to take effect of all the above data.
Instructions
For explanation of this method of sharing profits, see Volume I, pages 281-284.
V
Practice Data
This set contains material for the student’s practice work in keeping the records of a corporation engaged in trading and manufacture. Two blank books will be used for the record. Of the “Journals,” pages 1-32 comprise the general journal; pages 34-44 the cash book; pages 45-48, the sales journal; page 49 the sales returns and allowances journal; page 51 the purchase journal (to be used for the month of September only); and pages 54-57 the voucher register (to be used after the purchase journal is discontinued). Pages 58-60 are to be used for the record of continuous trial balances. Of the “Ledger” blank, pages 1-44 comprise the general ledger; pages 45-51 the sales ledger; and pages 52-56 the purchase ledger. Column headings for the different journals are given in the blanks.
It is expected that the student has already acquired correct habits of the daily posting of customers’ and creditors’ accounts. In addition to a training in some peculiarities of manufacturing accounts, the purpose of the course is to give the student practice in handling some of the larger problems of accounting which are not of daily occurrence. For the first few assignments considerable detail is given to provide a necessary minimum of practice in the summarization and posting of the different books of original entry. After this the ordinary transactions are given in condensed form to save unnecessary repetition and burdening the student. In the use of the analytical general journal, the student must be very careful to make entries in the proper column, as otherwise trouble will be experienced with the controlling accounts. (See Volume I, pages 410, 430, and 431.)
Open the following accounts in the various ledgers as indicated. The numeral preceding the account title indicates the ledger folio on which the particular account is to be opened.
General Ledger—Give one-third page to each account except Notes Receivable, Trade Debtors, Merchandise Inventory, Notes Payable, Vouchers Payable, and Subscribers, for each of which allow 4 additional lines, shortening the allowance for the account next following in each case.
The column headings for the different books are given in the blanks with a few exceptions. The fourth columns of the sales and sales returns and allowances journals are left blank. The student should write in here “Sundry Office Supplies.” This will be used till October 31, 1916, at which time it will be necessary to write in its place, “Knoxfrauds.” The heading for voucher register, column No. 5, which is left blank, must be written in as above, “Sundry Office Supplies Purchases,” for use until October 31, when “Raw Materials Purchases” will be substituted.
Messrs. Stanley Jackson, J. T. Edwards, and P. Hansen, on September 1, 1915, made application as incorporators to the Secretary of State for a certificate of incorporation authorizing the Acme Office Furnishings Co. to transact a general business of all kinds in trading, manufacturing, and printing, as principals or as agents, to acquire and trade in real estate, patents, trade-marks, licenses, and the like, and to act as promotion and financial agents. The customary certifications were made, the organization tax of $50 was paid, and the certificate duly issued. The authorized capital stock was $100,000, divided into 1,000 shares of common stock only, of par value $100 each. Subscriptions at par to capital stock had been made as follows:
| Stanley Jackson | 225 | shares |
| J. T. Edwards | 162 | ” |
| P. Hansen | 113 | ” |
| T. J. Noble | 100 | ” |
| A. H. Lawrence | 75 | ” |
| H. C. McCullough | 50 | ” |
At the first meeting of the incorporators and subscribers, after the adoption of a set of by-laws and organization thereunder, a proposal of sale made by the Jackson, Edwards, Hansen firm of their business and good-will at a stated figure of $50,120.97 was referred to the board of directors for their consideration and investigation, with authority to act. After looking over the properties, all of which it was found would be advantageous to the company, the proposal was accepted and transfer was made. A committee from the board was appointed to make a careful appraisal of the purchased properties and report as soon as possible. Accordingly, on September 15, the following report of valuation was made and accepted and authority given for the opening up of a set of accounting records with the stated values of the properties. The services of a public accountant were secured to plan and install a system that would meet the needs of the proposed business and to open the books.
The properties acquired were: cash $5,269.14; accounts receivable, as per schedule following, $10,125.61; notes receivable $1,250; desks and tables inventory $15,694; bookcases and filing cabinets inventory $18,392; sundry office supplies inventory $8,196.27; rent prepaid $125; insurance unexpired $95.36; delivery equipment $492.50; store furniture and fixtures $526; office furniture and fixtures $274; good-will $4,500.
The liabilities assumed were: accounts payable, as per schedule following, $10,126.73; notes payable $4,692.18. Upon the guaranty by Jackson, Edwards, Hansen of the accounts and notes receivable taken over, the company assumed the contingent liability on notes receivable under discount amounting to $250. No cognizance was taken of prepaid discount.
Payment was made to Jackson, Edwards, Hansen by the cancellation of indebtedness on their subscription contracts in the amounts severally shown, and in cash for the balance (distributed in the ratio of their subscriptions)—Jackson $54.44, Edwards $39.19, and Hansen $27.34.
A. H. Lawrence and H. C. McCullough on September 20 paid in cash 75% of their subscriptions, the balance due in 30 days. Certificates of stock, properly executed, were issued September 20 to all the above-mentioned parties, except Noble, in the amounts of their subscriptions.
Open the books and prepare a balance sheet of the company according to the data given.
Instructions
The fourth method illustrated in Volume I, pages 454 and 457, is to be used for opening the books.
Record the cash payment of organization tax as on September 1.
The purchase of the Jackson, Edwards, Hansen business is to be recorded under date of September 1, making use of the accounts “Jackson, Edwards, Hansen, Vendors” and “Plant and Sundry Assets.” Upon receipt of the appraisal committee’s report, bring the detailed assets and liabilities onto the books. It is to be noted that only one Inventory account is carried, in which the detail must be shown, using one line for each kind of commodity. Bring the discounted note on the books. This is not included in the amount given for notes receivable outstanding.
In a small corporation with stock closely held, certificates are sometimes issued although not yet fully paid for.
VI
Practice Data
The following schedules support their respective titles found among the assets and liabilities taken over and appraised by the Acme Office Furnishings Co.:
| Accounts Receivable | |
| Smith Brooks Stationery Co., June 24, $750; July 7, $100; | |
| August 22, $113.14; 2/10 | $963.14 |
| The Brush Co., May 20, $825; August 15, $216.69; 2/10, 1/30 | 1,041.69 |
| The Kistler Stationery Co., April 18, $1,000; June 15, $250; | |
| August 20, $317.40; 2/10 | 1,567.40 |
| C. F. Hoeckle Office Supply Co., March 12, $1,000; | |
| July 18,$123.90 | 1,123.90 |
| John Bach & Sons, June 13, $300; July 30, $119.36 | 419.36 |
| T. J. Stewart Office Specialties Co., July 20, $319.45; | |
| August 12, $523.12 | 842.57 |
| Saxon Edwards, February 10, $585; May 23, $206.75 | 791.75 |
| T. C. Macie & Co., May 11, $115.10; June 21, $210.15; | |
| July 8, $450; August 25, $465.15; 2/10, n/30 | 1,240.40 |
| The Alexander Jacobs Co., August 28, $362.25; 3/5, 2/10 | 362.25 |
| Field & Co., June 15, $1,015.05; July 6, $250; | |
| August 24, $508.10; 2/10, n/30 | 1,773.15 |
| Accounts Payable | |
| The P. J. Johnson Mills Co., January 15, $1,895.60; | |
| August 5, $736.15; 1/30 | $2,631.75 |
| B. F. Brainard & Co., April 18, $590.10; | |
| July 11, $802.15 | 1,392.25 |
| Jackson City Supply Co., June 10, $512.60; | |
| June 25, $428.20; July 18, $622 | 1,562.80 |
| F. C. Good Rubber Co., July 1, $175.19; | |
| August 13, $300; 2/10, 1/30 | 475.19 |
| B. A. Franklin Press, May 2, $850; June 22, $262.15 | 1,112.15 |
| Brickley Desk Co., March 8, $912.50; May 6, $1,500; | |
| August 16, $540.09; 2/10, 1/30 | 2,952.59 |
| Notes Receivable | |
| John Bach & Sons, dated July 3, for 3 months with interest | |
| at 6% and discounted at the Drew National Bank, | |
| August 16, at 8%. Face of note $250. | |
| Andrew Jackson, dated August 25 for 60 days, without interest. | |
| Face $750. | |
| The Brush Co., dated July 29, for 2 months, with interest | |
| at 6%. Face $500. | |
| Notes Payable | |
| No. 91, favor Second National Bank for $2,500, dated July 15, | |
| at 3 months, discounted at 6%. | |
| No. 95, favor Brickley Desk Co. for $1,261.40, dated August 20, | |
| at 4 months, interest 6%. | |
| No. 96, favor B. F. Brainard & Co., for $930.78, dated | |
| August 25, at 60 days, interest 6%. | |
| The new system provides for a voucher register, but due to | |
| delay on the part of the printer, a creditors ledger will | |
| have to be opened temporarily. Open the sales and purchase | |
| ledgers according to the data given. | |
Instructions
Record the above data directly (i.e., not via journal) in the various ledgers. The details of the various sales and purchases should be shown, and not just the total to be charged or credited to each account.
VII
Practice Data
The board, having completed negotiations with T. J. Noble, authorizes the purchase from him of the whole of his right, title, and interest in a patent device known as Knoxfraud to be used for the purpose of preventing the raising of the amounts of commercial paper. The transfer is made, including the trade-mark covering “Knoxfraud,” and payment to Noble is made by the cancellation of 90 shares on his subscription contract and full-paid stock is issued him therefor. Make the entry under date of September 20.
In order to avoid detail, all additional customers will be handled under a collective account in the sales ledger called “Sundry Customers.” Transactions will be grouped and summarized wherever possible. Make record under proper dates. (Figures at beginning of paragraphs signify September dates.)
September 1. Received check for $311.05 from Kistler Stationery Co. in payment of their bill of August 20, $317.40, less $6.35 discount.
3. Alexander Jacobs Co. paid their bill of August 28, $362.25 less $10.87 discount. Sold the Brush Co. at 2/10, n/30, desks and tables $875.40, and bookcases $469.75.
4. Drew petty cash check for $150 and placed it in petty cash drawer in charge of bookkeeper. Field & Co. paid their bill of August 24, $508.10 less $10.16 discount, and $500 on account.
5. Paid P. J. Johnson Mills Co. bill of August 5, $736.15 less discount $7.36, and $500 on account. Smith Brooks Stationery Co., paid their bill of August 25, $113.14 less $2.26 discount. T. C. Macie & Co. paid their bill of August 25, $465.15 less $9.30.
6. Bought of R. M. Goddard Furniture Co. at 1/30, n/60, desks and tables $5,912.60, bookcases $3,190.10, and office supplies $837.40. Sold C. F. Hoeckle Office Supply Co. n/30, desks $1,512.75, filing cabinets $647.80, office supplies $215.69.
8. C. F. Hoeckle Office Supply Co. paid $750 on account.
9. Paid B. F. Brainard & Co. bill of April 18, $590.10. Sold T. C. Macie & Co. at 2/5, 1/10, tables $1,575.50, filing cabinets $440.25, office supplies $175.30.
11. Paid Jackson City Supply Co. bill of June 10, $512.60.
12. Sold C. F. Hoeckle Office Supply Co. at 1/30, n/60, tables and desks $1,895, bookcases $625.30, office supplies $110.85.
13. Paid F. C. Good Rubber Co. bill of August 13, $300 less $3 discount. Jno. Bach & Sons paid $250 on account. The Brush Co. paid their bill of September 3, $1,345.15 less $26.90 discount.
15. Paid Brickley Desk Co. bill of August 16, $540.09 less $5.40 discount, and bill of March 8, $912.50 less special discount of $12.50 in consideration of giving our note No. 1, for $1,500 at 6%, payable in 6 months, in settlement of bill of May 6, $1,500. Brush Co. paid bill of August 15, $216.69 less $2.17 discount. Sold Jno. Bach & Sons at 2/10, n/30, desks $1,680, filing cabinets $725.90, office supplies $240.60.
16. Bought of P. J. Johnson Mills Co., at 2/10, n/30, tables $3,085.95, bookcases and filing cabinets $5,293.85, office supplies $1,750.90.
18. T. J. Stewart Office Specialties Co. paid their bill of July 20, $319.45. Sold Alexander Jacobs Co., at 1/30, n/60, desks $1,465.85, bookcases $625.95, office supplies $145.60.
19. T. C. Macie & Co. paid their bill of September 9, $2,191.05 less $21.91 discount.
21. Sold Saxon Edwards at 2/5, 1/10, tables and desks $1,327.85, bookcases $842.60, office supplies $222.60.
24. Sold Field & Co. at 1/30, n/60, tables and desks $1,825, bookcases and filing cabinets $735, office supplies $246.
25. Saxon Edwards paid on account $500.
26. Bought of B. F. Brainard & Co., at 1/30, n/60, desks $4,675, filing cabinets $5,080, office supplies $1,280. Jno. Bach & Sons paid bill of September 15, $2,646.50 less $52.93 discount. Paid P. J. Johnson Mills Co. bill of September 16, $10,130.70 less $202.61 discount.
Instructions
For the transactions of September, the cash disbursements journal will be operated as a full posting medium, i.e., all charges for cash paid out will be posted from it.
VIII
Practice Data
(Figures at beginning of paragraphs signify September dates.)
September 27. Sold Smith Brooks Stationery Co. at 2/5, 1/10, tables and desks $1,200, bookcases and filing cabinets $1,150, office supplies $175.
28. Paid B. A. Franklin Press bill of May 2, $850.
29. Brush Co. paid their note of July 29, $500 with interest $5. The board of directors authorized the purchase of a piece of land lying outside the city limits, with good shipping and warehouse facilities, to be used as a site for a factory for the manufacture of Knoxfrauds, paying the Hoboken Development Co. $10,000 cash (with the current year’s taxes of $75 unpaid and due the City of Hoboken, February 1, 1916), and $125 to J. N. Hicks for fees in connection with special search of title and recording of deed. Plans and specifications which Noble had had prepared six months ago when negotiations with him had been opened by Jackson in behalf of the Jackson, Edwards, Hansen firm were adopted and ordered, placed with contractors for bids to be received not later than October 6, the board reserving the right to accept any or reject all bids.
30. Sold Brush Co. at 2/5, 1/10, tables $1,475.80, bookcases $723.85, office supplies $340. Paid salesmen’s salaries $2,500; commission to salesmen $500; salesmen’s traveling expense $1,500; in-freight and delivery $525.69, delivery expense $200; rent September 15 to October 15, $250; receiving and shipping room expense $150; sundry office expense $100.25; office salaries $600; advertising $275; petty cash voucher $137.10, of which $45.50 was for telegraph, telephone and postage, $50 for office stationery, $25 for sundry selling expense, and $16.60 for sundry office expenses. Cash sales for the month were: office supplies $1,325.40, bookcases $2,150, desks and tables $4,250.
Summarize and post completely all books of original entry. (See Volume I, page 431, for general journal summary.) Take a trial balance, recording it in the first two columns on pages 58-60, “Journal Blank.” Enter all accounts—whether needed for this trial balance or not—in the order in which they are carried in the general ledger. Leave bottom and top lines free for totals and forwarding where necessary.
Instructions
September 29. Record the accrued taxes on land in the general journal as a liability to the City of Hoboken.
30. Distribute the cash sales through the sales journal, entering only the total for all departments in the cash book.
IX
Practice Data
The directors plan to keep sufficient funds on hand to take advantage of all discounts offered on purchases. All invoices will therefore be entered “net” in the Vouchers Payable column of the voucher register. Extension will be “gross,” however. Postings to Purchase Discount account will be made from the voucher register. Purchase Discount column in the cash book will be used as a memo column of discounts actually taken. The difference between the totals of the purchase Discount columns in voucher register and cash book at the end of a month (or other posting period) shows the amount of unearned discount on that date. This should always be checked against the discounts entered in detail in the voucher register, for the unpaid vouchers as shown in Unpaid Vouchers column of the register. (Figures at beginning of paragraphs signify October dates.)
October 1. Delivery of the voucher register having been made, your accountant closes the purchase ledger and opens the voucher register, transferring the balances thereto. The Kistler Stationery Co. presented their bill for $150 ($95.50 for stock books, records, etc., and $54.50 for stationery and printing). Paid New York Novelty Works $15 for corporate seal. Paid Northwestern Fire Insurance Co. $125 for 1-year policy on stock of goods.
3. Sold Jno. Bach & Sons at 2/10, n/30, desks $1,755, bookcases and filing cabinets $658.90, office supplies $140. In order to raise money for the purpose of building and equipping the Knoxfraud factory, the board of directors authorized the sale of the rest of the unsubscribed stock at not less than 95. Accordingly subscriptions were received from A. J. Scobey for 90 shares at 96, from A. K. Ladd for 125 shares at 95, and from J. B. Gaynor for 60 shares at 97. One-half is received in cash, the rest due on October 25. Certificates of stock are issued the new stockholders.
4. Smith Brooks Stationery Co. paid their bill of September 27, $2,525 less $50.50 discount.
5. The bank notified you John Bach & Son’s note for $250, dated July 3, for 3 months at 6% and under discount with them since August 16, has gone to protest; you took up the note, drawing your check in favor of the Drew National Bank for $256.25 including protest fees, and notified John Bach & Sons. Paid R. M. Goddard Furniture Co. bill of September 6, $9,940.10 less $99.40 discount.
6. Bought of Jackson City Supply Co. at 1/30, n/60, office supplies $3,028.95. Sold T. C. Macie & Co. at 2/5, 1/10, desks $1,685, bookcases $642, office supplies $156. Paid Hoboken Electric Co. light and power bill for September, $50 ($30 was for sign display).
7. The bids for the construction of the factory were opened and all found to exceed the architect’s estimate by $10,000 or more. It was accordingly decided to reject all bids and construct the factory upon their own responsibility, retaining I. M. Builder as supervising architect and appointing J. T. Noble as purchasing agent and general superintendent during construction. All funds from the sale of stock were ordered placed under a Building Fund account in the Drew National, subject to drawing by Hansen in payment of all bills when passed for payment by Edwards and Noble. The transfer of funds was accordingly made. Alexander Jacobs returned desks and tables $465.85 of their purchase of September 18. Brush Co. paid their bill of September 30, $2,539.65 less $50.79 discount. C. F. Hoeckle Office Supply Co. paid their bill of September 6, $2,376.24.
8. Drew check for $500, advances to salesmen, which the bookkeeper charged to an account entitled Salesmen’s Advances opened in the customers’ ledger. Paid N. G. Goodman, accountant, $250 for services, in connection with installation of the system of accounts.
9. Sold Kistler Stationery Co. at 1/30, n/60, tables and desks $1,858.95, bookcases and cabinets $720, and office supplies $248.
10. Took at cost price, furniture from stock for store and office (desks and tables, $150 for office and $300 for store; bookcases and filing cabinets, $175 for office and $75 for store).
11. Bought from the New Model Truck Co., delivery trucks for $3,000, giving our note with 6% interest at 6 months for $2,500 and $500 cash.
12. Sold C. F. Hoeckle Supply Co. at 1/30, n/60, tables and desks $1,625, bookcases and cabinets $720, and office supplies $140.
13. Received J. T. Noble’s demand note without interest for $1,000 in payment of balance of subscription contract. The C. F. Hoeckle Office Supply Co. paid bill of September 12, $2,631.15 less $26.31 discount. T. C. Macie & Co. paid their bill of October 6, $2,483 less $49.66 discount.
15. Sold Alexander Jacobs Co. at 1/30, n/60, desks $1,825.85, bookcases $642, office supplies $240. Paid note No. 91, $2,500. Jno. Bach & Sons paid their bill of 10/3, $2,553.90 less $46.98 discount, and an allowance of $50 on bookcases and $155 on tables account of damage.
16. Bought of R. M. Goddard Furniture Co. at 1/30, n/60, tables and desks $9,425, bookcases and cabinets $8,227, office supplies $1,025.
18. Sold T. J. Stewart Office Specialties Co. at 2/5, 1/10, desks and tables $1,878, bookcases and cabinets $580, office supplies $249.
19. Alexander Jacobs & Co. paid their bill of September 18, $1,771.55 less $17.72 discount.
20. T. J. Stewart Office Specialties Co. returned office supplies $49.50 and cabinets $75, of their purchase of October 18. A. H. Lawrence and H. C. McCullough paid $3,125, the balance on their subscriptions.
24. Andrew Jackson paid his note of August 25, $750. The T. J. Stewart Office Supplies Co. paid their bill of October 18, $2,582.50 less $51.65. Sold Field & Co. at 1/30, n/60, desks and tables $1,789, bookcases and cabinets $680, office supplies $348. Sold Sundry Customers at n/30, desks and tables $1,100, bookcases and cabinets $860, office supplies $350. Paid note No. 96, $930.78 with interest $9.31.
25. A. J. Scobey, A. K. Ladd, and J. B. Gaynor paid the balance on their subscriptions, $13,167.50.
26. Bought from Brickley Desk Co. at 2/10, n/30, tables and desks $6,240, bookcases and cabinets $3,780. Paid B. F. Brainard & Co. bill of September 26, $11,035 less $100.35. R. M. Goddard Furniture Co. made us an allowance on purchase of October 16, of $200 on desks and $150 on cabinets due to latent defects.
27. Paid Kistler Stationery Co. bill of October 1, $150.
Instructions
October 1. See page 39 for method of transferring purchase ledger accounts to voucher register.
October 5. See Volume I, page 327, for handling Bach’s protested note. Here the record will be partly in the voucher register and partly in the general journal.
October 7. Where a special bank account is kept temporarily, oftentimes a separate cash book is used. One additional column on each side of the cash book will also serve to segregate the charges and credits to it. Here, since receipts are few, they will be entered in the regular bank column with an “X” placed in front of them to secure periodic analysis. All disbursements will be made by regular voucher check, but recorded in the first column of the cash disbursements journal instead of the regular bank column. Inasmuch as only the one account is kept on the ledger with the bank, postings to it will have to be made in two items—one the regular, the other the building fund—for both receipts and disbursements. An alternative method is to carry the detail of the account only in the cash book, posting only totals of all receipts and disbursements to the ledger bank account. However handled, the cash book should show, when balanced, the amounts in both funds and the trial balance should contain the same information.
To effect the transfer of cash to the Building Fund account at the bank, a regular voucher check is drawn to order of Building Fund account. This is distributed in the voucher register to Sundry columns as a charge to Voucher Payable and must be entered on both sides of the cash book but, of course, not posted.
October 8. Charge payment to Goodman to Organization Expense.
October 10. Distribute the merchandise taken from stock through the sales journal, with the necessary correcting entry in the general journal. (See Volume I, pages 423 et seq.) Since but one Furniture and Fixtures account is carried, the detail necessary for analysis must be shown in it just as with Merchandise Inventory.
October 11. The Model Truck Co. transaction must be split, the cash portion being recorded in the voucher register, the rest in the general journal. (See page 43 for method of handling notes payable under the voucher system.)
October 13. Certificate of stock is issued to Noble.
October 20. These receipts from subscribers are regular items.
October 25. These receipts from subscribers are building fund items.
October 26. The student will perhaps detect at once that the discount of $100.35 on the Brainard bill is incorrect. It is to be entered as given, however; correction will be made later.
X
Practice Data
October 30. Sold Jno. Bach & Sons at 2/10, n/30, tables and desks $1,465, bookcases and cabinets $456, office supplies $435. Sold Sundry Customers at n/30, desks and tables $1,800, bookcases and cabinets $620, office supplies $300. Cash sales for the month were desks and tables $3,500, bookcases and cabinets $2,832.60, office supplies $3,167.40. Office supplies drawn from stock for use by the office, $350. Pay-roll check on Building Fund carried $1,950.70 for excavating and foundation labor, Noble $200 salary, Builder $350 commission. Paid Hoboken City Hospital $50 bill for workmen injured during construction. Paid regular pay-roll $5,769 (salesmen’s salaries $2,650; salesmen’s commission $580; salesmen’s traveling expense $1,525.50; delivery men $250; receiving and shipping clerks $163.50; office salaries $600); N. Y. C. Ry., freight-in $631.72; N. Y. Paper Co. for sundry office expense $84.75; Ward & Gow Publicity Co. for advertising $280, and sundry selling expense $50.25; petty cash voucher $144.95, of which $50.75 was for telegraph, telephone, and postage, $5 to Bullinger Publicity Co. for entry in city directory, $62.50 for stationery and printing, $10 for credit information to R. G. Dunn & Co., $16.70 for sundry office expenses. Paid the Builders Testing Laboratories $50 for test of cement and concrete for use in factory construction. Paid J. P. Landown rent, October 15 to November 15, $250. Sundry Customers returned tables $150, bookcases $85, and sundry office supplies of $52.50 of their purchase of October 24 as not being what they had ordered; we returned bookcases $500 to the Brickley Desk Co. of our purchase of October 26, because of failure of patent doors to operate.
Summarize all the books of original entry and post completely. For method of summarizing the voucher register, see page 36. Extend into the Unpaid Vouchers column all unpaid vouchers as shown by the Manner of Payment column. Take a trial balance as of October 30, 1915, recording it in the third and fourth columns of pages 58-60 of the journals. Be sure to show the two balances for cash, the regular and the building fund.
When posting, make the sales ledger self-balancing and take a trial balance of it, recording it on page 61, journal blank. (See Volume I, page 420, for method of making ledger self-balancing.)
Verify the balance of Vouchers Payable account by checking against the Unpaid Vouchers column of the voucher register.
Instructions
Charge office supplies drawn from stock to Stationery and Printing.
Pay-roll checks are usually drawn to the order of treasurer or other company official. Make the necessary distribution in the voucher register.
Bookcases, $500, returned to Brickley Desk Co. are priced at billed price, i.e., the net credit allowed us will be $490 ($500 less 2%). Be careful to make the proper voucher register entry, as three columns are affected, viz., Vouchers Payable, Purchase Discount, and Bookcases and Filing Cabinets Purchases.
It should be noted that wherever an allowance is made, the figure given in the practice data will always be the gross figure, unless specifically stated otherwise.
Charge credit information cost to Sundry Office Expense.
XI
Practice Data
Make the following detailed entries for transactions with customers and creditors under the dates given:
November 2. Field & Co. gave their note for 1 year at 6% for $3,571.05 in payment of invoices of July 6, September 24, and balance June 15. Gave P. J. Johnson Mills Co. our note at 6 months for $1,462.59, which included $66.99 interest to date at 6% for balance of bill of January 15, $1,395.60.
3. Kistler Stationery Co. honored our sight draft for $1,250 payment of bills of April 18 and June 15.
4. Wrote B. F. Brainard & Co. claiming a $10 adjustment on account of overpayment on October 26 of bill of September 26, on which the discount allowed was $110.35.
5. Paid Jackson City Supply Co. bill of October 6, $3,028.95 less $30.29 discount. Gave Brickley Desk Co., our note for $9,329.60 at four months at 6% for bill of October 26, $10,020 less $190.40 discount and credit memo of October 30 for $500.
6. Field & Co. wrote stating that our monthly statement of account to them carried a charge for October 24 of $2,817, whereas their bill of that date carried $2,310. An investigation showed their contention correct, the error being due to a transposing of charges between them and Sundry Customers for sales on October 24 when the sales journal entry was made. The error was corrected and correct statements were sent out. The Brush Co. paid their bill of May 20, $825.
7. Received credit memo from B. F. Brainard & Co. for $10 in reply to letter of November 4.
10. Kistler Stationery Co. gave their note for 6 months at 6% for $2,826.95, payment of bill of October 9.
12. Jno. Bach & Sons paid their bill of October 30, $2,356 less $47.12. Saxon Edwards paid their bill of May 23, $206.75, and balance on February 10, $85. Paid B. F. Brainard & Co. bill of July 11, $802.15 less credit memo of November 7, $10.
15. Paid R. M. Goddard Furniture Co. bill of October 16, $18,677, less credit memo of October 26 for $350 and discount of $183.27. C. F. Hoeckle Office Supply Co. paid their bill of October 12, $2,485 less $24.85 discount.
18. Alexander Jacobs paid their bill of October 15, $2,707.85 less $27.08 discount.
21. Saxon Edwards paid their bill of September 21, $2,393.05.
24. Sundry Customers paid their bills of October 24, $2,529.50.
25. Field & Co. paid their bill of October 24, $2,310 less $23.10 discount.
27. T. C. Macie & Co. gave their note for $775.25 in payment of bills of May 11, June 21, and July 8.
30. Sundry Customers paid their bills of October 30, $2,720. C. F. Hoeckle Office Supply Co. paid their bill of July 18, $123.90, and balance on March 12, $250.
December 4. Paid Jackson City Supply Co. $1,050.20 for bills of June 25, and July 18.
9. Smith Brooks Stationery Co. gave their note for $873.15, including interest $23.15 on unpaid bills of June 24 and July 7.
13. T. J. Stewart Office Specialties Co. honored sight draft for bill of August 12, $523.12.
17. Offered Field & Co. a discount of $71.05 from the face of their note of November 2 if they would pay $2,000 cash and give a new note for $1,500 for the balance. Offer was accepted and cash and new note for $1,500 received on December 20. (In making adjustment take account of accrued interest on old note of $26.79.)
18. Paid F. C. Good Rubber Co. bill of July 1, $175.19.
20. Paid our note No. 95, $1,261.40, with $25.23 interest, held by the Brickley Desk Co.
23. Honored B. A. Franklin Press draft at sight for bill of June 22, $262.15. Bank’s statement of account showed charges of $1.25 and 75c respectively for collection of Kistler Stationery Co. draft of November 3, and T. J. Stewart Office Specialties Co. draft of December 13.
Instructions
November 2. Treat all sight drafts when honored as cash transactions.
November 6. Field & Co. adjustment is made in the general journal. Be careful to make entry in proper columns.
November 7. The $10 allowance made us by B. F. Brainard & Co. must be recorded in red in the voucher register close beside the next voucher which will be paid to Brainard—in this case the bill for $802.15 dated October 1. No entry will need to be made in the general journal to secure the proper posting of this item, as the entry in the voucher register is merely a memo to prevent overpayment at time of next settlement. (See page 40 for discussion of the problem of returns and allowances.)
December 17. Handle the Field & Co. note transaction with care. The discount is a charge to Interest and Discount.
December 23. Run the bank’s collection charges through on a voucher which must be recorded in voucher register and cash book.
XII
Practice Data
The following transactions took place during the remainder of the fiscal year which ended August 31, 1916, and are to be entered as of the given date:
January 3. A one year’s insurance policy at a cost of $250 cash was taken out on a stock of merchandise which had been removed to a warehouse, as stated below.
February 1. The accrued taxes of $75 at date of purchase of factory site were paid.
March 1. On account of the flourishing condition of the sales, an interim dividend of 4% was declared and paid. Noble’s was applied as a partial payment on his stock note.
June 15. The Boston Office Co. sent $5,000 of office specialties to be sold on a 5% commission basis for their account.
July 1. A statement of affairs was received from Jno. Bach & Sons showing their insolvency and copy of an agreement signed by several creditors to accept settlement of all claims on a 40% basis. Your attorney, having been unable to collect and having investigated, advised the acceptance by you of their offer. Accordingly on July 27, a check was received from Bach & Sons for 40% of the balance as shown by your books. (Charge Jackson, Edwards, Hansen with 60% of $169.36, the part guaranteed by them, and Reserve for Doubtful Accounts with 60% of $256.25.)
On August 15, 1916, the factory building was completed. The following expenditures had been made: for steel, concrete, brick and other materials $15,740.20; for labor of all sorts $11,579.35; for insurance, injuries incurred during construction, legal expense in defense, and interest on moneys borrowed for the building fund, $750; J. T. Noble’s salary $2,000; I. M. Builder’s fees and commission $1,113.51; and Builders’ Testing Laboratories $250. The factory was largely of concrete and numerous tests were necessary. Several purchases of cement had been returned as not being of the required standard. The company’s note for $10,000 had been discounted for $9,800 and the proceeds placed in the Building Fund to finance the undertaking. The $200 discount is included in the $750 mentioned above.
Noble reported that orders for machinery and equipment had been placed with sundry firms and that about three months would be required before the machinery could be placed and ready for operation as some of the machines were of delicate and complex construction and would require careful testing before acceptance. He suggested that orders for the raw materials used in the manufacture of the Knoxfraud be now placed to take advantage of a low market. Accordingly $10,000 worth was ordered, an advance payment of $2,500 being made on August 25 and charged to New Method Manufacturing Co. in the sales ledger to show our claim against them for the prepayment—the balance to be paid when delivery is made, not earlier than October 31.
Due to lack of floor space in the sales department and the necessity of carrying a large assortment of styles in stock at all times, on January 2, 1916, a warehouse was rented nearby for a monthly rental of $100 payable in advance. Under date of August 31, 1916, enter a payment of $900.
The receiving and shipping room quarters were also removed to the warehouse. On March 1, a portion of the warehouse was sublet at a monthly rental of $40 payable in advance. Enter a receipt of $280 under date of August 31, 1916. Services of A. Pinkerton for $20 a month beginning March 1 were secured to watch store, warehouse, and factory. Record on August 31, 1916, a payment of $120.
It was decided to close out the division of sundry office supplies and dispose of the balance on hand October 31 at a lump sum.
Instructions
February 1. Refer to Practice Data VIII for the original booking of this item.
March 1. Charge the interim dividend to Dividend account, since there is no Surplus on the books against which to charge it.
June 15. No entry will be made of the Boston Office Co. consignment. (A memo entry in the journal may be made, if desired. This would consist merely of a statement of the receipt of the goods, with no extension of amount into the money column.)
July 1. Handle the Jno. Bach bankruptcy with care. The basis for the entries indicated rests on the original sale agreement between the Acme Office Furnishings Co. and Jackson, Edwards, Hansen, Vendors. (See Practice Data V.)
August 15. Record the discounted note for $10,000 as usual. Be careful not to post the discount twice. All expenditures are cash items.
August 31. Charge A. Pinkerton’s salary to Warehouse Expense. This is not quite accurate, but sufficiently so.
XIII
Practice Data
In addition to the special data given in Practice Data XII, the following transactions in due course took place:
Make the record as of August 31, 1916 with summary entries.
Sales Journal—Sales to Sundry Customers were: desks and tables $200,670.20, bookcases and filing cabinets $153,803.40, and sundry office supplies $16,115.26. Cash sales were: desks and tables $35,000, bookcases and filing cabinets $21,500, and sundry office supplies $2,825.15. Return sales and allowances to Sundry Customers were: desks and tables $4,240.15, bookcases and filing cabinets $4,250.65, and sundry office supplies $675.50.
Cash Book—Received: from cash sales as above; from Sundry Customers $269,359.50 less sales discount of $3,940.20; from notes receivable $5,000; from notes payable discounted $42,500 less $350 discount; from notes receivable discounted $15,000 less discount of $50. Disbursed for vouchers payable $359,720.40, of which $100 is chargeable to Building Fund (Noble’s salary).
Journal—Gave our notes to Sundry Creditors for $8,500; received notes from Sundry Customers $25,200.50; notes receivable discounted were paid by makers at maturity $10,250; stationery was drawn from stock $250 and used for advertising purposes.
Voucher Register—Bought desks and tables $99,842.95, bookcases and filing cabinets $73,758.15, and sundry office supplies $12,684.40. Purchases discount was $2,153.40; in-freight and delivery $3,740.28; receiving and shipping room expense $2,690.14; light, heat, and power $725.16; salesmen’s salaries $65,840.20; salesmen’s commissions $20,730.30; traveling expenses $42,420.70; advertising $12,280; sundry selling expense $940.03; delivery expense $7,280.90; warehouse expense $50; office salaries $11,600; stationery and printing $450; collection and exchange $30.05; interest and discount $1,096.27; sundry office expense $72.15; telephone, telegraph, and postage $475.03; notes payable $47,250.19; rent $3,250; power equipment $5,000; taxes $160.15; Noble’s salary for August $200. (Charge $100 to Factory Building and $100 to Power Equipment.)
Instructions
These transactions are listed in summarized form to avoid detailed entry and, at the same time, to provide the necessary volume of business. They are to be entered as indicated. Use as little space as possible.
Sales Journal—Use 2 lines for the entries. Enter returns and allowances in their proper journal.
Cash Book—Be careful to indicate by some distinctive mark all interest and discount items recorded in the Sales Discount column. No purchase discount on paid vouchers is given inasmuch as the cash book record of it is merely a memo, although providing data for checking the amount of unearned discount at the close of a period. It will doubtless be found that in this summarized method of stating transactions much detailed information is omitted (because not absolutely essential), that would be available under ordinary conditions.
Journal—Treat stationery taken from stock as a credit to Sundry Office Supplies Sales; this is not included in the sales journal data given above.
Voucher Register—For the sake of saving space, run all these transactions through on one voucher, using just one line for the entry, except in Sundry column, where use as many as are needed. $100 of Noble’s salary comes out of building fund cash, as indicated on page 675.
XIV
Practice Data
Summarize the various books and post completely. Be careful, in summarizing, to show any extraneous items recorded, for the sake of convenience, in theoretically improper columns or books.
XV
Practice Data
Take a trial balance of the general and sales ledgers and record them as usual.
XVI
Practice Data
Draw up statements for the year, supporting both the profit and loss statement and the balance sheet by schedules. (See Volume I, pages 411-412 and 509-510, for suggestive forms and instructions as to methods of condensation of data.)
Take into consideration the following data:
Rent income received in advance $40; warehouse rent paid in advance $100; interest accrued on notes receivable $50; salesmen’s salaries accrued $420; salesmen’s commissions accrued $125; advertising bills unpaid $100; advertising paid in advance $250; stationery on hand $50.
Insurance: first policy, one year, bought October 1, cost $125, part unexpired $10.04; second policy, one year, bought January 2, cost $250, ⁴/₁₂ unexpired $83.33. Taxes for the year 1916, estimated $565.42, ⅔ used $376.95. Purchases discount not yet taken advantage of on unpaid vouchers, $475.
The Knoxfraud patent had 15 years to run when purchased. Write off ¹/₁₅ of its value, it being the policy of the company to maintain an experimental laboratory and so overcome any possible supersession. Write off organization expense and good-will 5% each. Create reserves for: furniture and fixtures 10%; delivery equipment 15%; doubtful accounts ½% on all sales gross. Take no account of depreciation on factory building or power equipment.
Inventories of stock-in-trade: desks and tables $4,943.86, bookcases and filing cabinets $1,521.31, sundry office supplies $3,197.20, total $9,662.37.
In-freight and delivery: charge $2,500 to Desks and Tables purchases, $2,100 to Bookcases and Filing Cabinets Purchases, $297.69 to Sundry Office Supplies Purchases.
Light, heat, and power: charge ¾ to Selling, ¼ to General Administrative.
Receiving and shipping room: charge ¾ to Shipping, ¼ to Receiving, of which 50% to Desks and Tables, 45% to Bookcases and Filing Cabinets, 5% to Sundry Office Supplies.
Rent: charge ⁴/₅ to Selling, ¹/₅ to General Administrative.
Insurance: charge $335.24 to Selling, $41.75 to General Administrative.
Taxes: charge all of the 1915 taxes ($160.15) Surplus.
Discount on stock: charge to Factory Buildings.
Instructions
Most of the above data are necessarily arbitrary, particularly the basis for distribution of the various expense items. For many such items, even in practice, a more or less arbitrary basis must be adopted. See Chapters III, XIV, and XXVII for a brief discussion of this point.
The student may object to the indicated methods of handling some of the items but is asked to make the record as suggested. Any necessary corrections will be made later.
Draw up all formal statements, for presentation to the instructor, on blank paper, letter size, i.e., 8½ x 11 inches.
XVII
Practice Data
Adjust and close the books in accordance with the information given in the preceding Practice Data XVI.
The student is referred, for illustration of the work of adjusting and closing the books, to Volume I, Chapters XXIX, XXX, and XLIII, and to certain portions of Chapters XIV and XIX of Volume II.
XVIII