APPENDIX B PRACTICE WORK FOR STUDENT— SECOND HALF-YEAR
Reading edition
The practice work for the second semester is designed to give facility in the use of accounting records, and accuracy and confidence in the handling of a volume of transactions. Accordingly, this work consists largely of two somewhat extended problems to be recorded in blank books. The first is a problem in partnership, involving particularly the adjustment of partners’ accounts at the close of the fiscal period. Many points met in the operation of records using controlling accounts are included. The second is concerned with a trading corporation. Here some of the problems peculiar to the corporation are met, as well as those connected with the operation of a departmental business.
The stationery furnished provides two sets of blank books, as indicated above, the one for the partnership, the other for the corporation. Specific directions for their use are given with each problem. Upon completion of the problem these blanks are to be turned in for inspection and may be retained by the school if deemed best. A few miscellaneous problems are also provided. The loose-leaf supplies will usually be found suitable for their solution.
Here, also, sufficient practice work is furnished to accompany 30 hours of lecture or classroom work. If desired, this may be supplemented by the use of material in Appendix C. If an adequate understanding of the use and operation of accounting records is to be secured, disconnected problem work should not be substituted for the practice work provided in this Appendix B.
In handling this semester’s work, the student must not allow himself to fall behind in the preparation of the assigned work There is quite a volume of work to be done and the material of the various assignments is so interrelated that unless the practice work is kept up to date, most of its value is lost through the student’s not being ready to carry out instructions given covering the current work. Careful work and the proving of its accuracy will prevent much waste of time in making corrections.
I
This set comprises a general journal; a sales journal, a purchase journal, and the cash journals, for convenience bound together in one book; and a general ledger, purchase ledger, and sales ledger, also bound together in one book. Of the general journal, pages 1-15 inclusive will be used for transactions which cannot be recorded in the special journals, the rest of the blank being used as a place of record of the monthly trial balances. Of the special journal blank, pages 1-4 inclusive will be used for sales; pages 5-7 inclusive for purchases; page 8 and following for the cash book. For the purpose of securing a better comprehension of some features of the operation of controlling accounts the general journal is not provided with the customary analysis columns. The student is thus compelled to consider the effect of each entry on the controlling account as well as on the subsidiary account.
The sales journal provides for the analysis of sales into cash, credit, and partners’ withdrawals, the first column being the total or general column in which all items are to be entered; the others, “On Account,” “Cash,” and “Partners’ Withdrawals.” The same provisions, with the exception of the Partners’ Withdrawals column, are to be made in the purchase journal.
The cash book columns will be, on the debit side, General, Accounts Receivable, Sales Discount, and Net Cash; and on the credit, General, Accounts Payable, Purchase Discount, and Net Cash. All items affecting the controlling accounts, “Accounts Receivable” and “Accounts Payable,” are to be entered gross in their respective columns, the totals of which are posted to the controlling accounts when the cash book is summarized. The discount columns on both sides of the cash book are to be used for the recording of sales and purchase discounts, and all items to be posted to general ledger accounts other than the controlling accounts should be entered gross in the “General” columns. All amounts will be extended net into the “Net Cash” columns, and the difference between these two columns will represent the cash balance.
The general ledger will include pages 1-27 inclusive, the sales ledger pages 28-34 inclusive, and the purchase ledger 35-40 inclusive. The first four pages preceding ledger ruling are to be used for index purposes.
All transactions affecting individual customers’, creditors’, and partners’ accounts are to be posted daily to those accounts. The postings to the controlling accounts will follow the explanations in the text or special instructions.
This set affords the student facility in handling a partnership set of books operated under a controlling account system. The operation of this set will require great care in posting to controlling and subsidiary accounts in order to keep them in agreement.
To secure the maximum of practice with a minimum of detail work, the transactions for each month are summarized and are to be dated as of the last day of the month. The dates of issuance or maturity of the notes, however, are given so that this can be recorded.
The student should become familiar with the following ledger accounts to which he should strictly adhere in the classification of all transactions. These accounts are to be opened in the ledger at the places indicated. The first numeral following the account title indicates the page, the second the line on that page. “Line 1” refers to the very first line at the top of the page.
Ledger Accounts (40 pages) General ledger, pages 1-27 Sales ledger, ” 28-34 Purchase ledger, ” 35-40
Page Line
Cash 1 1
Investments 1 12
Notes Receivable 1 18
Accounts Receivable 1 30
Reserve for Doubtful Accounts 2 28
Merchandise Inventory 2 34
Notes Receivable, Special 3 1
Deposit with Westchester Lighting Co. 3 11
Delivery Equipment 3 21
Depreciation Reserve Delivery Equipment 3 31
Store Furniture and Fixtures 4 1
Depreciation Reserve Store Furniture and Fixtures 4 11
Office Furniture and Fixtures 4 22
Depreciation Reserve Office Furniture and Fixtures 4 31
Building 5 1
Depreciation Reserve Buildings 5 11
Notes Payable 5 22
Accounts Payable 6 1
Mortgage Payable 6 30
C. Allen Cotten, Profits Loan Account 7 1
Scott Wooster, Profits Loan Account 7 12
Landsdowne Woolsey, Profits Loan Account 7 26
C. Allen Cottenm Capital 8 1
C. Allen Cotten, Personal 8 13
Scott Wooster, Capital 9 1
Scott Wooster, Personal 9 13
Landsdowne Woolsey, Capital 10 1
Landsdowne Woolsey, Personal 10 13
Profit and Loss 11 1
Sales 12 1
Sales Returns and Allowances 12 19
Purchases 13 1
Purchases Returns and Allowances 13 19
In-Freight and Cartage 14 1
Salesmen’s Salaries 14 13
Salesmen’s Traveling Expenses 14 26
Advertising 15 1
Delivery Expense 15 13
Shipping Supplies 15 26
Out-Freight 16 1
Office Salaries 16 13
Office Supplies 16 26
Office Expense 17 1
General Expense 17 13
Cash Short and Over 17 29
Charity Donations 18 1
Association Dues 18 13
Light and Heat 18 26
Rent 19 1
Insurance 19 13
Taxes 19 26
Depreciation 20 1
Sales Discount 20 13
Bad Debts 20 26
Interest Cost 21 1
Purchase Discount 21 13
Interest Income 21 26
Miscellaneous Sales 22 1
On pages 28-34 inclusive, enter the following customers’ accounts, four to the page:
Arnold Sheriff & Co.
Atlas Dry Goods Co.
Baird Dry Goods Co.
Bostonian Dry Goods Co.
Burrows Dry Goods Co.
Century Dress Goods Co.
Childs & Son
Daniel & Co.
Eagle Dress Goods Co.
Emporium Dry Goods Co.
Falk & Taylor
Hudson Dry Goods Co.
Macmillian & Co.
Marquis Dress Goods Co.
Melrose Dry Goods Co.
Metropolitan Dry Goods Co.
Henry Miller
T. H. Miller
National Dress Co.
New York Silk Co.
Public Bargain Store
Rogers & Son
Silk & Dress Goods Exchange
Southern Dry Goods Co.
Thompson Hudson Co.
Wilson Williams Co.
Young, Smith, Field Co.
Beginning on page 35, enter these creditors’ accounts, four to a page.
American Dry Goods Co.
Associated Dry Goods Co.
Bentley, Gray & Co.
Claflins, Inc.
Carter Dry Goods Co.
Marshall Field & Co.
Miller & Rhoades, Inc.
Newcomb Endicott Co.
Wm. Taylor, Son & Co.
U.S. Dry Goods Co.
Wico Mills, Inc.
II
C. Allen Cotten, who has long been in the wholesale merchandising business, anticipating a revival of commercial activity in the early part of 19—, decided to enlarge his business. Accordingly, on January 2, 19—, he enters into a partnership agreement with Scott Wooster, a former executive of the United Dry Goods Co., of Philadelphia, and Landsdowne Woolsey, a retired real estate and insurance broker of New York.
According to the terms of the partnership agreement, Cotten’s investment was his business, based upon the following balance sheet which represented the book value of the items:
C. Allen Cotten Balance Sheet, December 31, 19—
Assets
Current Assets:
Cash $ 3,065.00
Notes Receivable (See Schedule 1) 2,500.00
Accounts Receivable (See Schedule 2) $25,150.00
Less—Reserve for Bad Debts 600.00 24,550.00
U. S. Liberty Bonds 3,000.00
Accrued Interest 90.00
Merchandise 21,780.00
Deferred Charges to Operation:
Prepaid Insurance $ 100.00
Office Supplies 150.00
Garage Rent 75.00 325.00
Fixed Assets:
Delivery Trucks $ 5,000.00
Less—Depreciation Reserve 500.00 4,500.00
Total Assets $59,810.00
Liabilities
Current Liabilities:
Notes Payable (See Schedule 3) $ 4,000.00
Accounts Payable (See Schedule 4) 25,600.00
Accrued Interest on Notes 20.00
Accrued Taxes 190.00
Total Liabilities 29,810.00
Net Worth
Represented by:
C. Allen Cotten, Capital $30,000.00
Schedules appended to the balance sheet of C. Allen Cotten:
Schedule 1. Notes Receivable:
Baird Dry Goods Co. $ 1,500.00
60-day 6% note due February 1.
Childs & Son 1,000.00
Non-interest-bearing note, due February 15.
$ 2,500.00
Schedule 2. Accounts Receivable:
Atlas Dry Goods Co. $ 2,283.00
Burrows Dry Goods Co. 2,000.00
Century Dress Goods Co. 4,800.00
Falk & Taylor 3,400.00
Marquis Dress Goods Co. 2,795.00
T. H. Miller 1,425.00
National Dress Co. 2,892.00
Rogers & Son 3,650.00
Wilson Williams Co. 1,905.00
$25,150.00
Schedule 3. Notes Payable:
Marshall Field & Co. $ 2,000.00
90-day 6% note due March 1, 19—.
American Dry Goods Co. 2,000.00
90-day 6% note due March 15, 19—.
$ 4,000.00
Schedule 4. Accounts Payable:
Associated Dry Goods Co. $ 3,950.00
Claflins, Inc. 6,290.00
Wico Mills, Inc. 2,780.00
Miller & Rhoades, Inc. 5,672.00
Newcomb Endicott Co. 3,678.00
Marshall Field & Co. 3,230.00
$25,600.00
Cotten guaranteed the collection of all notes and accounts outstanding, and the partnership agreement provided that in case any of the accounts should be judged uncollectible by agreement among the partners or otherwise, such amount is to be charged to Cotten’s personal account on the date such items are found uncollectible.
Wooster’s investment was $20,000 cash, his services and experience; and Woolsey was admitted as a special partner investing $50,000 in cash.
The partnership agreement further provided that Cotten was to be allowed an annual salary of $4,800, Wooster $6,000, but Woolsey was to receive no salary; and that interest at the rate of 6% per annum was to be charged on the drawings in excess of the salary allowed for the fiscal period from the date such drawings exceeded salary until the date of closing the books. The drawings of Woolsey were also to be charged at 6% per annum from the date of draft to the date of closing the books. Interest at 6% per annum was to be allowed on capital, and in all cases was to be figured on the basis of 360 days to the year, 30 days to the month. Profits and losses were to be shared as follows: Woolsey 20%, Cotten 36%, and Wooster 44%. The fiscal period was to consist of six months, ending on June 30 and December 31, respectively.
The partnership agreement also provided that the capital accounts of the partners were to remain intact and that any credit balances remaining in the partners’ personal accounts at the close of the fiscal period were to be transferred to their loan accounts which were to be treated as current accounts bearing 6% interest and subject to adjustment of interest at the close of each fiscal period.
Make the necessary entries in general journal and cash book to record the respective investment transactions, and post.
Instructions
Make a full but concise statement of the partnership agreement, following the form of opening entry illustrated on page 166. This opening statement is the first record in the general journal and should provide all of the information needed by the bookkeeper for the proper handling of the partners’ accounts at the close of the fiscal period.
Immediately following this narrative will be the formal investment entries. On the line just preceding the formal investment entry for each of the partners, use the following—or similar—phraseology: “C. Allen Cotten made the following investment.” A separate investment entry is made for each partner.
These entries are to be made complete in the general journal and posted immediately, except the several cash items, which, included in the totals of the cash book, will be posted at the end of the month. These cash items will therefore be checked both in the journal and in the cash book, where they must be entered in the “General Ledger” and “Net Cash” columns.
III
Summarized transactions for the month of January were as follows. Enter these in their respective journals. Posting of these entries will comprise the next assignment.
Purchases:
American Dry Goods Co., 2/10, n/60, $10,817.50.
Bentley, Gray & Co., 2/10, n/60, $5,694.
Claflins, Inc., 2/10, 1/30, n/60, $12,639.
Carter Dry Goods Co., 2/10, 1/30, n/60, $18,709.48.
U. S. Dry Goods Co., 3/10, 2/15, n/60, $12,104.90.
Miller & Rhoades, Inc., 2/10, 1/30, n/60, $2,689.40.
Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $1,897.42.
Marshall Field & Co., 3/10, 2/15, n/60, $11,744.60.
Cash purchases were $2,564.73.
Sales:
Arnold Sheriff & Co., 2/10, 1/15, n/30, $5,264.80.
Baird Dry Goods Co., 2/10, 1/15, n/30, $4,872.35.
Bostonian Dry Goods Co., 2/10, 1/15, n/30, $3,843.68.
Century Dress Goods Co., 2/10, n/30, $5,492.72.
Childs & Son, 2/10, 1/15, n/30, $4,794.12.
Daniel & Co., 2/10, n/30, $4,683.38.
Eagle Dress Goods Co., 2/10, n/30, $5,978.35.
Emporium Dry Goods Co., 2/10, n/30, $2,461.93.
Falk & Taylor, 2/10, 1/15, n/30, $5,947.60.
Hudson Dry Goods Co., 2/10, 1/15, n/30, $3,678.90.
Macmillian & Co., 2/10, n/30, $4,642.50.
Marquis Dress Goods Co., 2/10, n/30, $4,267.50.
Metropolitan Dry Goods Co., 2/10, n/30, $4,180.
Silk & Dress Goods Exchange, 2/10, n/30, $3,780.40.
Cash sales were $847.56.
Cotten took woolens on January 15, $50.
Journal:
Goods for $500 were returned by Falk & Taylor as unsatisfactory.
Macmillian & Co. was credited with $435 because of goods lost in
transit, for which a claim was filed against the
Central Hudson Railway Co.
Damaged goods were returned to Carter Dry Goods Co., $897.80.
Received 6% 60-day note, due March 28, from Century Dress Co.
for January bill $5,492.72 less a special discount of 5%.
Cash Receipts (excluding those listed above):
Arnold Sheriff & Co., January bill $5,264.80 less 2%.
Bostonian Dry Goods Co., January bill $3,843.68 less 1%.
Falk & Taylor, balance of January bill $5,447.60 less 2%.
Hudson Dry Goods Co., January bill $3,678.90 less 1%.
Atlas Dry Goods Co., December bill $2,283 net.
Century Dress Goods Co., December bill $4,800 net.
Falk & Taylor, December bill $3,400 less 2%.
Rogers & Son, December bill $3,650 less 2%.
Cash Disbursements (excluding those listed above):
Shelving, partitions, counters, etc., for store $3,800.
Desks, tables, mimeograph, and typewriters for office $1,250.
A new Pierce motor truck $5,000.
Deposit with the Westchester Lighting Co. $50.
Salesmen’s salaries $2,000.
Salesmen’s traveling expenses $997.84.
Wages of chauffeurs and shipping clerks $500.
Garage rent $125.
Repairs to cars $50.
Licenses for trucks $50.
Oil and gasoline $50.
Boxes, crates, nails, paint, etc., for shipping $297.13.
Advertising according to contract with
Baten Advertising Co. $5,000
Freight and haulage $312.49.
Insurance on stock $250.
Lighting and heating service cost $502.60.
Office salaries $990.
Stationery, pads, pencils, envelopes, etc., $193.97.
Telephone and telegraph $422.
Postage and special messenger service $237.84.
Wages of cleaners, watchman, repairs to elevator $594.70.
Check to American Red Cross $100.
Semiannual dues to the Merchants’ Association $50.
Rent for January $1,250.
Cotten drew $400; Wooster $500.
Associated Dry Goods Co., December bill $3,950 less 2%.
Claflins, Inc., December bill $6,290 less 2%.
Wico Mills, Inc., December bill $2,780 net.
Newcomb Endicott Co., December bill $3,678 less 2%.
Marshall Field & Co., December bill $3,230 less 2%;
and January bill $11,744.60 less 2%.
Carter Dry Goods Co., balance of January bill $17,811.68 less 2%.
U. S. Dry Goods Co., January bill $12,104.90 less 3%.
American Dry Goods Co., January bill $10,817.50 less 2%.
Cash was short $3.16.
Rent for February $1,250.
Instructions
All cash transactions are to be entered in the cash book whether listed under “Cash” above or not. In recording a cash sale or cash purchase in the cash book, extend the amount into the “General Ledger” and “Net Cash” columns only.
Be sure to classify and post all items correctly, inasmuch as a wrong classification or posting may necessitate many correction entries.
The claim against the railroad company will be charged to Sales Returns and Allowances until a settlement is effected. Such items are often charged to a Freight Claims account, with suitable adjustment to Sales Returns and Allowances when settlement is made for less than the amount claimed.
The word “balance,” as in the phrase, “Falk & Taylor, balance of January bill $5,447.60 less 2%,” calls attention to an adjustment of some sort—returns or allowance—which has been or is to be considered in determining the amount still due.
Charge the freight and haulage to In-Freight and Cartage.
Great care must be exercised in the general journal entries affecting individual customers’ and creditors’ accounts, since these also affect their respective controlling accounts. Inasmuch as the general journal does not provide the customary analytic columns, it will be necessary, when making every such entry, to indicate the controlling account affected and, when posting, to post the item both to the individual account and to the control account. The following illustrations should be followed in making entries of this kind:
(1) Sales Returns and Allowances 12 500.00
Falk & Taylor (Accounts Receivable) 26/1 500.00
(2) Carter Dry Goods Co. (Accounts Payable) 33/6 897.80
Purchases Returns and Allowances 18 897.80
(3) Notes Receivable 1 5,218.08
Sales Discount 20 274.64
Century Dress Co. (Accounts Receivable) 25/1 5,492.72
Note particularly the way in which the ledger folios are shown for both accounts.
IV
Summarize the sales, purchase, and cash journals; balance the cash book.
In summarizing the sales journal, first total each column and draw a horizontal line under these amounts. On the next line record the summary entry, entering the amounts to be debited in the first money column and those to be credited in the second. The total of the partners’ withdrawals should not be posted, for they have already been transferred to the general ledger accounts at the time they occurred. The amount will therefore be checked in the summary entry. The total cash sales will also be checked, inasmuch as these have already been recorded in the cash book. The summary entry for the sales journal will appear as follows:
Accounts Receivable, Dr. . . . . . . . .
Partners’ Personal, Dr. ✔ . . . . . . . .
Cash, Dr. ✔ . . . . . . . .
Sales, Cr. . . . . . . . .
The purchase journal should be summarized somewhat similarly but the total purchases are to be debited to “Purchases,” the purchases on account credited to “Accounts Payable,” and the cash purchases are to be checked. The summary entry of this journal will be:
Purchases, Dr.
Accounts Payable, Cr. . . . . . . . .
Cash, Cr. ✔ . . . . . . . .
In summarizing the cash journals, pencil-foot all columns of both journals. Then formally foot the columns on both sides, using the same line on both sides, i.e., the totals must appear on one line extending across both pages of the book. This may leave blank lines on either side according as one has had more entries than the other. Underline the totals. Make summary entries somewhat as follows:
In the receipts journal:
Cash
Sales Discount
Accounts Receivable
General ✔
In the disbursements journal:
General ✔
Accounts Payable
Purchase Discount . . . . . . . .
Cash . . . . . . . .
Use the first two money columns on either side for the entry of the amounts. Underline these entries through the four money columns. When posting these summary entries, the items “General” on either side will be checked as the details composing them have already been posted.
On the next line write in the Explanation columns on either side, “Net Cash as above,” and extend the total amounts of cash receipts and cash disbursements into the Net Cash columns on their respective sides. Balance the cash book by entering “Balance” on the disbursements journal and extending the amount in the Net Cash column. Show totals at the same level on both sides and draw double lines through all columns on both sides except the Explanation columns. Bring the cash balance down in the receipts journal.
Post completely all books of original entry. When posting the general journal, be very careful to post to the indicated controlling accounts. See Assignment III, Instructions, for the method to be followed.
Take a trial balance of your general ledger and record it under date of January 31, beginning on page 16 of the journal blank. Write “Trial Balances, 19—” at the top of the page and in the small space over the money columns “January 31.” From the general ledger, copy the names of all accounts, whether or not there are as yet any entries in them, in the order there shown. Do not include the individual customers’ and creditors’ accounts in the above list, for these are taken care of by the inclusion of their controlling accounts. Be careful to write the account name at the extreme left of the explanation space, close to the date column. Leave one line at the bottom of page 16 and at the top of page of 22 for “Totals” and “Totals Forward.”
Since one page is not sufficient to complete the record, continue it on page 22, there recording the rest of the accounts and heading the page and columns as on page 16. The intervening pages will be used as shown in Assignment VI.
Prove the controlling accounts against their subsidiary accounts. To make this proof, at the top of page 30 of the general journal, write “Balances of Accounts Receivable, 19—” and list the names of all customers’ accounts, writing the account name to the extreme left of the explanation space, close to the “Date” column. Place the words “January 31” in the small space over the first money column, in which the balances of accounts receivable for January will be recorded. Do not use the second money column on this page; this will be used for February balances.
Beginning on page 34, make a similar list of creditors’ accounts. The instructions covering the listing of accounts receivable apply here also, with the exception that the words “Accounts Payable” are to be substituted for “Accounts Receivable.”
List the individual account balances of customers’ and creditors’ accounts for each month, as described above, and record the total of each list in their respective columns. These totals must agree with the balances shown in the corresponding controlling accounts, i.e., the total of customers’ accounts outstanding for January must be equal to the balance of the controlling account, “Accounts Receivable,” shown in the general ledger. A discrepancy between a controlling account and its subsidiary accounts must always be located and corrected.
V
Summarized transactions for February were:
Purchases:
American Dry Goods Co., 2/10, 1/30, n/60, $13,487.92.
Associated Dry Goods Co., 2/10, n/60, $13,562.70.
Claflins, Inc., 2/10, 1/30, n/60, $10,897.80.
U. S. Dry Goods Co., 3/10, 2/15, n/60, $12,247.80.
Marshall Field & Co., 3/10, 2/15, n/60, $17,792.90.
Cash purchases $2,987.50.
Sales:
Arnold Sheriff & Co., 2/10, 1/15, n/30, $5,287.45.
Atlas Dry Goods Co., 2/10, n/30, $5,794.32.
Baird Dry Goods Co., 2/10, 1/15, n/30, $4,618.73.
Burrows Dry Goods Co., 2/10, n/30, $3,289.49.
Bostonian Dry Goods Co., 2/10, 1/15, n/30, $6,642.
Century Dress Goods Co., 2/10, n/30, $4,497.35.
Eagle Dress Goods Co., 2/10, n/30, $4,127.49.
Emporium Dry Goods Co., 2/10, n/30, $4,793.80.
Henry Miller, 2/10, n/30, $5,008.34.
Melrose Dry Goods Co., 2/10, 1/15, n/30, $4,278.18
New York Silk Co., 2/10, 1/15, n/30, $3,874.70.
Southern Dry Goods Co., 2/10, n/30, $5,087.92.
Public Bargain Store, 2/10, n/30, $4,972.
Cash sales $2,989.90.
Cotten took woolens, February 28, $50.
Journal:
Goods were returned by Century Dress Goods Co. $340, and
Southern Dry Goods Co. $845, as unsatisfactory.
Made Public Bargain Store an allowance of $85.
Analysis of the January freight bill showed that $147.60
was paid for freight on sales.
Returns to American Dry Goods Co. $978.
Cash Receipts:
Baird Dry Goods Co., January bill $4,872.35 less 2%.
Burrows Dry Goods Co., December bill $1,000 on account.
Childs & Son January bill $4,794.12 less 1%.
Daniel & Co., January bill $4,683.38 net.
Eagle Dress Goods Co., January bill $5,978.35 net.
Emporium Dry Goods Co., $1,000 on account.
Arnold Sheriff & Co., February bill $5,287.45 less 2%.
Atlas Dry Goods Co., February bill $5,794.32 less 2%.
Bostonian Dry Goods Co., February bill $6,642 less 2%.
Century Dress Goods Co., balance February bill $4,157.35 less 2%.
Henry Miller, February bill $5,008.34 less 2%.
Public Bargain Store, balance February bill $4,887 net.
Cash was over $1.21.
The note of Baird Dry Goods Co. for $1,500 was paid February 1
with interest, amounting to $15.
The note of Childs & Son was paid, $1,000.
Sold miscellaneous ends, $48.50.
Cash Disbursements:
Bentley, Gray & Co., January bill $5,694 less 2%.
Claflins, Inc., January bill $12,639 less 2%.
Miller & Rhoades, Inc., December bill $5,672 net.
Wm. Taylor, Son & Co., January bill $1,897.42 less 2%.
Salesmen’s salaries $2,000.
Salesmen’s railroad fares, hotel bills, etc., $1,013.48.
Chauffeurs’ wages $240.
Garage rent $125.
Shipping clerks $210.
Gasoline and oil $75.60.
Fine for stopping car in front of hydrant $10.
Paper, wrapping supplies, crates, $308.30.
Wooster withdrew $500 February 15.
Advertising as per schedule $3,000.
Freight and haulage bills $257.80.
Rent for March $1,250.
Lighting and heating bills $497.58.
Office manager’s and clerks’ salaries $998.
Stationery, mimeograph supplies, etc., $214.40.
Wages of cleaners, watchman, repairs to windows
and new steps at door, $874.50.
Telephone and telegraph $175.80.
Messengers $128.
Bought five $1,000 U. S. Liberty bonds at 95½, with
accrued interest of $59.88.
Cotten drew $400; Wooster $500.
U. S. Dry Goods Co., February bill $12,247.80 less 3%.
Notice has been received that a receiver has been appointed for Wilson Williams Co.
Instructions
In making general journal entries affecting customers’ or creditors’ accounts, be sure to indicate the posting to the corresponding controlling accounts.
At the time the freight bills are paid, the total amount is charged to In-Freight and Cartage. They are analyzed later into freight paid on sales and in-freight, and the amount paid on sales is transferred to the proper account by means of a journal entry.
Record the sale of miscellaneous ends and the like in the cash receipts journal and post to Miscellaneous Sales.
Charge the $10 fine to Delivery Expense.
Be careful to charge the accrued interest on Liberty bonds to the proper account.
VI
Summarize the special journals. In summarizing the cash receipts journal for February and the following months, do not underline the totals of the General and Net Cash columns, as instructed in Assignment IV. Deduct the balance as of the first of the month from the totals shown in both columns, indicating, in the explanation column, the nature of this amount. (See page 282 for illustration.) Underline these amounts and write the summary entry for the cash receipts journal as previously explained, taking care that the Cash account is debited only with the receipts of the current month.
Post completely, being particularly careful in handling items affecting controlling accounts, especially when posting the general journal.
Take a trial balance of the general ledger as of February 28. In making record of this and succeeding trial balances, to obviate the necessity of rewriting account titles, fold back the two money columns on page 17 so that they “face up” on page 18, thus providing four money columns. This shortened leaf may now be used for recording trial balances for February and March. Similarly with succeeding leaves.
Do not fail to record the balances of customers’ and creditors’ accounts in the proper places, and prove the totals against their respective controlling accounts.
VII
Summarized transactions for March were:
Purchases:
Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $8,942.50.
Newcomb Endicott Co., 2/15, n/60, $7,414.
U. S. Dry Goods Co., 3/10, 2/15, n/60, $7,609.40.
Wico Mills, Inc., 2/10, 1/30, n/60, $8,337.80.
Carter Dry Goods Co., 2/10, 1/30, n/60, $8,790.
Bentley, Gray & Co., 2/10, n/60, $10,890.45.
Marshall Field & Co., 3/10, 2/15, n/60, $10,219.
Cash purchases $3,390.
Sales:
Young, Smith, Field Co., 2/10, n/30, $6,874.32.
Thompson Hudson Co., 2/10, n/30, $4,732.46.
Rogers & Son, 2/10, n/30, $3,146.34.
Public Bargain Store, 2/10, n/30, $3,590.70.
National Dress Co., 2/10, n/30, $4,346.90.
New York Silk Co., 2/10, 1/15, n/30, $6,784.50.
Melrose Dry Goods Co., 2/10, 1/15, n/30, $7,894.80.
T. H. Miller, 2/10, n/30, $6,237.40.
Macmillian & Co., 2/10, n/30, $2,476.50.
Hudson Dry Goods Co., 2/10, 1/15, n/30, $4,475.
Falk & Taylor, 2/10, 1/15, n/30, $4,790.
Eagle Dress Goods Co., 2/10, n/30, $3,105.
Daniel & Co., 2/10, n/30, $3,490.70.
Childs & Son, 2/10, 1/15, n/30, $4,789.40.
Arnold Sheriff & Co., 2/10, 1/15, n/30, $3,980.40.
Cash sales $2,462.75.
Wooster drew merchandise $100.
Journal:
Gave Marshall Field & Co. our 60-day 6% note due May 15,
for their bill of February, $17,792.90 less 3%.
Received merchandise returned by Melrose Dry Goods Co. $1,487.90.
Returned goods to Associated Dry Goods Co. $416.90.
Received a credit memo for $162.40 from Claflins, Inc.
for spoiled goods.
Macmillian & Co. gave us their 60-day 6% note, due May 25,
for balance of January bill $4,207.50.
Marquis Dress Goods Co. was allowed $485 for delay in transit.
Out-freight for February was $139.86.
Metropolitan Dry Goods Co. issued their 30-day 6% note,
due April 15, for January bill $4,180.
Cash Receipts:
Century Dress Goods Co. paid their note due March 28 with interest.
Baird Dry Goods Co., February bill $4,618.73 less 2%.
Burrows Dry Goods Co., February bill $3,289.49 net.
Eagle Dress Goods Co., February bill $4,127.49 less 2%.
Emporium Dry Goods Co., January bill $1,461.93 net.
Marquis Dress Goods Co., December bill $2,795 net.
Melrose Dry Goods Co., February bill $4,278.18 less 1%.
T. H. Miller, December bill, $1,000 on account.
National Dress Co., December bill, $1,000 on account.
Southern Dry Goods Co., balance of February bill, $4,242.92 less 2%.
Young, Smith, Field Co., March bill $6,874.32 less 2%.
Thompson Hudson Co., March bill $4,732.46 less 2%.
New York Silk Co., March bill $6,784.50 less 1%.
Hudson Dry Goods Co., March bill $4,475 less 2%.
Daniel & Co., March bill $3,490.70 less 2%.
Childs & Son, March bill $4,789.40 less 2%.
Arnold Sheriff & Co., March bill $3,980.40 less 2%.
Rogers & Son, March bill $3,146.34 net.
The receivers for Wilson Williams Co. declared March 15 an
initial liquidating dividend of 35%, which was received.
Cash Disbursements:
Salesmen’s salaries $2,000.
Salesmen’s traveling expenses $1,896.42.
Chauffeurs’ and shipping clerks’ wages $435.
Garage rent $125.
Gasoline, oil, and minor parts, $116.84.
Crates, boxes, and packing materials, $412.80.
Advertising as per schedule $3,000.
Rent for April $1,250.
Insurance policies, elevator, fire, plate glass, burglary, $550.
Lighting and heating $512.90.
Office salaries $1,872.
Books, stationery, $226.40.
Telephone and telegraph, postage, $896.40.
Changing partitions $280.
Wages of cleaners and watchman $490.
Painting of partitions $28.
New bell on elevator $18.75.
Contribution to Salvation Army Drive $100.
Cotten drew $400; Wooster $500.
Cash was short $12.92.
Freight bill $262.90.
American Dry Goods Co., balance of February bill $12,509.92 less 2%.
Associated Dry Goods Co., balance of February bill $13,145.80 less 2%.
Claflins, Inc., balance of February bill $10,735.40 less 2%.
Miller & Rhoades, January bill $2,689.40 net.
Marshall Field & Co., March bill $10,219 less 2%.
Paid Marshall Field & Co. and American Dry Goods Co.
December notes with interest.
Lent $5,000 to Woolsey, in return for which he issued to the
order of the firm his six months’ 6% note for a similar amount.
Instructions
Record the interest received on notes receivable in the General Ledger column of the cash receipts journal.
Enter the Woolsey note in the proper account.
A liquidating dividend represents the amounts disbursed by a receiver to the creditors of the bankrupt.
VIII
Summarize the subsidiary journals.
Post completely.
Take a trial balance of the general ledger as of March 31.
Prove the totals of the subsidiary accounts against the totals of their respective controlling accounts.
IX
Summarized transactions for April were:
Purchases:
American Dry Goods Co., 2/10, n/60, $8,292.50.
Associated Dry Goods Co., 2/10, n/60, $7,784.90.
Claflins, Inc., 2/10, 1/30, n/60, $10,467.70.
Miller & Rhoades, Inc., 2/10, 1/30, n/60, $6,742.80.
U. S. Dry Goods Co., 3/10, 2/15, n/60, $8,276.40.
Marshall Field & Co., 3/10, 2/15, n/60, $28,450.
Wico Mills, Inc., 2/10, 1/30, n/60, $4,970.80.
Cash purchases $1,988.75.
Sales:
Arnold Sheriff & Co., 2/10, 1/15, n/30, $7,145.90.
Atlas Dry Goods Co., 2/10, n/30, $6,890.70.
Baird Dry Goods Co., 2/10, 1/15, n/30, $7,294.60.
Bostonian Dry Goods Co., 2/10, 1/15, n/30, $9,874.50.
Century Dress Goods Co., 2/10, n/30, $4,927.90.
Daniel & Co., 2/10, n/30, $7,847.40.
Hudson Dry Goods Co., 2/10, 1/15, n/30, $8,475.90.
Henry Miller, 2/10, n/30, $5,982.90.
Rogers & Son, 2/10, n/30, $7,826.90.
Southern Dry Goods Co., 2/10, n/30, $7,495.80.
Thompson Hudson Co., 2/10, n/30, $6,475.80.
Young, Smith, Field Co., 2/10, n/30, $5,162.70.
Cash sales $1,920.80.
Journal:
Returned to Marshall Field & Co., $1,250 worth of merchandise
of the February purchase, cash adjustment effective as of
April 15 to be made at time of paying note.
Returned goods to Miller & Rhoades, Inc., $650.
Transferred a desk costing $125 from the office to the sales
department of store.
Received returned goods from Bostonian Dry Goods Co.,
$1,090; and from Henry Miller $785.
Received a 30-day 6% note from the Silk & Dress Goods Exchange
for January bill $3,780.40, due May 23.
Out-freight for March was $152.90.
The failure to book a payment of $10 for repairs on an
annunciator partly explained the cash shortage in March.
Cash Receipts:
Note of Metropolitan Dry Goods Co. for $4,180 was paid
April 15, with interest.
Burrows Dry Goods Co., balance of December bill, $1,000.
Eagle Dress Goods Co., March bill $3,105 less 2%.
Emporium Dry Goods Co., February bill $4,793.80 net.
Falk & Taylor, March bill $4,790 less 2%.
Macmillian & Co., March bill $2,476.50 less 2%.
Marquis Dress Goods Co., balance of January bill $3,782.50 net.
T. H. Miller, March bill $6,237.40 less 2%.
Melrose Dry Goods Co., balance March bill $6,406.90 less 1%.
New York Silk Co., February bill $3,874.70 net.
National Dress Co., on account, December bill, $1,000.
Arnold Sheriff & Co., April bill $7,145.90 less 2%.
Baird Dry Goods Co., April bill $7,294.60 less 2%.
Hudson Dry Goods Co., April bill, $8,475.90 less 2%.
Southern Dry Goods Co., April bill $7,495.80 less 2%.
Thompson Hudson Co., April bill $6,475.80 less 2%.
Young, Smith, Field Co., April bill $5,162.70 less 2%.
The firm discounted its 90-day 6% note, due July 15,
at the Merchants National Bank for $5,000.
The receivers for Wilson Williams Co. declared another
liquidating dividend of 15%.
Received from the railroad $25, an overcharge on demurrage.
Cash Disbursements:
Sales salaries $2,975.
Salesmen’s traveling expense $2,243.60.
Delivery expense $763.87.
Packing supplies $513.90.
Advertising for April $3,000, and for May $3,000,
less $250 as discount for prepayment.
Freight bills $297.60.
Light and heating $212.50.
Office salaries $2,140.
Office supplies $365.70.
Office expense $988.95.
General expense $897.12.
Rent for May $1,250.
Bentley, Gray & Co., March bill $10,890.45 less 2%.
Wico Mills, Inc., March bill $8,337.80 less 2%.
U. S. Dry Goods Co., March bill $7,609.40 less 2%.
Wm. Taylor, Son & Co., March bill $8,942.50 less 2%.
American Dry Goods Co., April bill $8,292.50 less 2%.
Claflins, Inc., April bill $10,467.70 less 2%.
Newcomb Endicott Co., March bill $7,414 less 2%.
Miller & Rhoades, Inc., balance of April bill, $6,092.80 less 2%.
Woolsey withdrew April 30 $500; Cotten, $400; and Wooster $500.
New adding machine and desks for office $500.
Paid taxes $190.
Instructions
Include the discount received on advertising with the purchase discounts. The charge to Advertising will, therefore, be gross.
Be sure to make the purchase discount adjustment necessitated by the returned goods transaction with Marshall Field & Co. Though this and the returned goods are to be taken into consideration when the note is paid, do not enter them now in the Notes Payable account, that adjustment being made at time of payment of note. Enter them in the Marshall Field & Co. account.
Disregard the depreciation adjustment on the desk transferred to the sales department.
Record the face of the discounted note in the General Ledger column, the amount of discount in the Sales Discount column with an (X) mark, and the net amount in the Net Cash column. In summarizing the cash book, this discount should be segregated from the total to be posted to Sales Discount, inasmuch as the former will be posted to Interest Cost.
Credit the overcharge on demurrage to In-Freight and Cartage.
X
Summarize the journals. In summarizing the debit side of the cash book previous to posting, remember that included in the Sales Discount column is an item of bank discount on the firm’s $5,000 note, which must be shown separately and charged to Interest Cost. Be sure you show this in the summary entries, in addition to the Sales Discount summary. To accomplish this the total of the Sales Discount column is best shown in two portions, the Sales Discount total on the one line, and the Interest Cost item on the next line.
Post completely.
Take a trial balance of the general ledger as of April 30.
Prove the subsidiary accounts against their respective controlling accounts.
XI
1. Summarized transactions for May were:
Purchases:
Bentley, Gray & Co., 2/10, n/60, $9,764.90.
Carter Dry Goods Co., 2/10, 1/30, n/60, $29,417.70.
Newcomb Endicott Co., 2/15, n/60, $10,846.40.
Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $9,497.50.
Marshall Field & Co., 3/10, 2/15, n/60, $11,145.80.
Cash purchases $1,872.45.
Sales:
Arnold Sheriff & Co., 2/10, 1/15, n/30, $9,465.80.
Baird Dry Goods Co., 2/10, 1/15, n/30, $8,467.90.
Century Dress Goods Co., 2/10, n/30, $9,748.80.
Daniel & Co., 2/10, n/30, $7,492.40.
Hudson Dry Goods Co., 2/10, 1/15, n/30, $9,948.30.
New York Silk Co., 2/10, 1/15, n/30, $9,742.50.
Silk & Dress Goods Exchange, 2/10, n/30, $9,865.80.
Southern Dry Goods Co., 2/10, n/30, $10,480.
Thompson Hudson Co., 2/10, n/30, $8,942.75.
Young, Smith, Field Co., 3/10, n/30, $16,290.
Cash sales $1,694.90.
Journal:
Young, Smith, Field Co. returned $1,985 worth of merchandise;
and Century Dress Goods Co., $625 worth.
Out-freight for April was $147.42.
Received from the National Dress Co., a 60-day acceptance drawn
on the United Textile Co. in favor of the firm, due July 15,
for $5,000.
Returned to Newcomb Endicott Co. $2,200 of merchandise.
Gave Associated Dry Goods Co. our 90-day note dated May 15,
non-interest-bearing, but with 90 days’ interest, $114.43,
included in the face, for their bill of April $7,784.90
less 2% cash discount.
Marshall Field & Co. note adjusted.
Final settlement of Wilson Williams Co. was effected May 15.
(See “Cash Receipts.”)
Due to temporary embarrassment of the Silk & Dress Goods
Exchange, their note was extended one month.
Cash Receipts:
Arnold Sheriff & Co., May bill $9,465.80 less 2%.
Atlas Dry Goods Co., April bill, $3,000 on account.
Baird Dry Goods Co., May bill $8,467.90 less 2%.
Bostonian Dry Goods Co., balance of April bill,
$8,784.50 less 2%.
Century Dress Goods Co., April bill, $2,500 on account.
Daniel & Co., April bill, $5,000 on account.
Hudson Dry Goods Co., May bill $9,948.30 less 2%.
New York Silk Co., May bill $9,742.50 less 2%.
Public Bargain Store, March bill, $2,500 on account.
Southern Dry Goods Co., May bill $10,480 less 2%.
Young, Smith, Field Co., balance May bill, $14,305 less 2%.
Interest on Liberty bonds due May 15, $119.75.
Cash was over $42.65.
For use of one of the motor trucks for the week,
$100 was received.
Sold packing materials, $80.75.
Macmillian & Co., paid their note with interest May 25.
Received $275 from the Central Hudson Railway Co. on our claim
made in January.
The receivers for Wilson Williams Co. paid a final liquidating
dividend of 10%.
Cash Disbursements:
Salesmen’s salaries $2,985.
Salesmen’s traveling expenses $2,213.72.
Delivery expenses $886.94.
Shipping and packing materials and supplies $516.70.
Advertising for June $3,000 less $250 discount for prepayment.
Rent for June $1,250.
Freight and haulage $467.90.
Lighting and heating $186.40.
Office salaries $2,040.
Office supplies $240.60.
Office expense $1,167.70.
General expense $912.67.
A contribution of $250 was made to the State University fund.
Paid Marshall Field & Co. note May 15 with interest
and adjustment.
Newcomb Endicott Co. balance of May bill, $8,646.40 less 2%.
Cotten withdrew May 15, $400; Wooster $500; and Woolsey $1,000.
Carter Dry Goods Co., March bill $8,790 net.
Wico Mills, Inc., April bill $4,970.80 less 1%.
U. S. Dry Goods Co., April bill $8,276.40 less 2%.
Wm. Taylor, Son & Co., May bill $9,497.50 less 3%.
Marshall Field & Co., May bill $11,145.80 less 2%.
2. The Acorn Manufacturing Company, a corporation, is organized with a capitalization of $250,000 of which $150,000 is common stock and the remainder preferred. The company buys the plant of Brown & Towne, whose balance sheet appears below, issuing therefor $75,000 of common stock and $25,000 of preferred stock. The partners transfer all assets except cash and the vendee assumes the liabilities.
Balance Sheet of Brown & Towne July 1, 19—
Assets Liabilities
Cash $ 10,000.00 Notes Payable $ 2,000.00
Notes Receivable 30,000.00 Accounts Payable 1,000.00
Accounts Receivable 20,000.00 Mortgage Payable 5,000.00
Inventory 30,000.00 Brown, Capital 46,000.00
Plant and Machinery 10,000.00 Towne, Capital 46,000.00
$100,000.00 $100,000.00
July
5. The remainder of the preferred stock is subscribed for
at 90 and paid in cash.
12. Subscriptions to common stock for $25,000 at 110 are
received and paid in cash.
20. The remaining common stock is subscribed for at 90 to be paid
for in four equal instalments at intervals of one month.
Dec.
1. All calls were met as due. Paid the organization tax
and filing fees in cash $250.
Prepare journal entries for the above on the books of the Acorn Manufacturing Company.
3. The A B Corporation is formed with a capital stock of $100,000, consisting of 1,000 shares par value $100 each. A subscribes for 500 shares, B for 200, C for 200, and D for 100. B, C, and D pay cash for their subscriptions. A pays in full for his subscription by turning over a business he has been conducting. The corporation acquires the assets and assumes the liabilities of A’s business as follows:
A’s Balance Sheet
Assets Liabilities
Merchandise $15,000.00 Accounts Payable $ 6,000.00
Accounts Receivable 19,000.00 A, Capital 40,000.00
Notes Receivable 12,000.00
$46,000.00 $46,000.00
(a) Make the necessary entries to open the books of the corporation.
(b) Make the necessary entries to close the books of A.
Instructions
Transfer the net claim against Marshall Field & Co., appearing in their account, to Notes Payable through the general journal. The balance of the note remaining in the latter account will be offset by the debit to be posted from the cash disbursements journal. In calculating the interest to be paid on the above note, take cognizance of an interest adjustment dating from April 15.
Transfer a sufficient amount from the Wilson Williams Co. account to the Reserve for Doubtful Accounts so that the balance of the latter account will be wiped out. The balance in the Wilson Williams Co. account is to be charged in accordance with the partnership agreement.
Credit the amount received for the use of the delivery truck to Delivery Expense.
The payment made by the railroad company should be credited to Sales Returns and Allowances to offset the debit made previously.
Problems 2 and 3 are, of course, separate problems not to be recorded in the books of Cotten, Wooster & Co.
XII
1. (a) Summarize the subsidiary journals. (b) Post completely. (c) Take a trial balance of the general ledger as of May 31. (d) Prove the subsidiary accounts against their respective controlling accounts.
2. At the end of the year net profits amount to $15,000, with a previous surplus balance of $50,000. Preferred stock amounts to $100,000, of which $20,000 is treasury stock; common amounts to $150,000, of which $50,000 has not been issued. The directors declare an 8% dividend on the preferred, and a 10% on the common, and appropriate $5,000 to a sinking fund reserve. Later the above dividends are paid. Make the entries needed to bring the above onto the books.
3. A corporation authorizes a $250,000 bond issue, of which $150,000 are traded for a plant, and $50,000 are sold on the open market at 102. The bonds bear 6% interest, payable semiannually. Show how you would handle the above transactions. Show your treatment at the time of the first interest payment, assuming the bonds to mature in 25 years.
Instructions
Problem 1 refers to the Cotten, Wooster & Co. problem.
Problems 2 and 3 do not relate to Cotten, Wooster & Co.
XIII
Summarized transactions for June were:
Purchases:
American Dry Goods Co., 2/10, n/60, $16,145.75.
Associated Dry Goods Co., 2/10, n/60, $15,927.80.
Claflins, Inc., 2/10, 1/30, n/60, $17,894.60.
Wico Mills, Inc., 2/10, 1/30, n/60, $4,792.45.
U. S. Dry Goods Co., 3/10, 2/15, n/60, $15,867.42.
Miller & Rhoades, Inc., 2/10, 1/30, n/60, $16,279.80.
Newcomb Endicott Co., 2/15, n/60, $15,318.40.
Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $5,728.
Marshall Field & Co., 3/10, 2/15, n/60, $6,716.90.
Cash purchases $1,813.40.
Sales:
Arnold Sheriff & Co., 2/10, 1/15, n/30, $8,465.90.
Baird Dry Goods Co., 2/10, 1/15, n/30, $7,964.60.
Burrows Dry Goods Co., 2/10, n/30, $6,279.45.
Bostonian Dry Goods Co., 2/10, 1/15, n/30, $9,763.80.
Childs & Son, 2/10, 1/15, n/30, $7,942.45.
Eagle Dress Goods Co., 2/10, n/30, $8,246.70.
Emporium Dry Goods Co., 2/10, n/30, $7,847.65.
Falk & Taylor, 2/10, 1/15, n/30, $8,972.70.
Hudson Dry Goods Co., 2/10, 1/15, n/30, $7,432.80.
Macmillian & Co., 2/10, n/30, $6,972.50.
Marquis Dress Goods Co., 2/10, n/30, $8,414.
Metropolitan Dry Goods Co., 2/10, n/30, $3,985.
Melrose Dry Goods Co., 2/10, 1/15, n/30, $8,945.
New York Silk Co., 2/10, 1/15, n/30, $7,987.50.
Southern Dry Goods Co., 2/10, n/30, $9,475.65.
Cash sales $1,472.60.
Journal:
Out-freight for May was $157.90.
Returned goods received from Daniel & Co., $1,875;
and Thompson Hudson Co., $935.
Received from Rogers & Son, Charles L. Sutton & Co.’s 90-day
6% note for $5,000, dated May 5, with 40 days’ interest
accrued, in payment of their April bill, the balance of
the payment in cash.
Returned $967.50 of merchandise to Miller & Rhoades, Inc.;
and $614.75 to Wico Mills, Inc.
Cash over of May was partly accounted for by failure to book
sale of old crates and supplies for $35.
The note of the Silk & Dress Goods Exchange, extended to and
due June 23, was not paid, as the firm was still in difficulties.
A mortgage for $25,000 was given to complete the purchase
of the building. (See “Cash Disbursements.”)
Cash Receipts:
Arnold Sheriff & Co., June bill $8,465.90 less 2%
Atlas Dry Goods Co., balance of April bill $3,890.70.
Century Dress Goods, balance of April bill $1,802.90.
Daniel & Co., on account $5,000.
Henry Miller, on account $2,500.
National Dress Goods Co., balance March bill $238.90.
Public Bargain Store, on account $500
Rogers & Son, balance April bill $2,793.57.
Thompson Hudson & Co., balance May bill $8,007.75 less 2%.
Bostonian Dry Goods Co., June bill $9,763.80 less 2%.
Southern Dry Goods Co., June bill $9,475.65 less 2%.
Macmillian & Co., June bill $6,972.50 less 2%.
Cash Disbursements:
Salesmen’s salaries $5,340.
Salesmen’s traveling expenses $2,917.94.
Delivery expenses $978.42.
Shipping supplies $523.80.
Advertising for July $3,000, less $250 for prepayment.
Freight and haulage $569.70.
Rent for July $1,250.
Insurance on auto trucks $250.
Lighting and heating $92.70.
Office salaries $2,465.
Office supplies $369.74.
Office expenses $1,254.60.
General expenses $1,219.62.
Cotten withdrew June 15 $400; Wooster $500.
Bentley, Gray & Co., May bill $9,764.90 less 2%.
Wm. Taylor, Son & Co., June bill $5,728 less 2%.
Semiannual dues to the Merchants’ Association $50.
Purchased a lot and building for $35,000, paying
$10,000 in cash and the balance remaining on mortgage.
Instructions
Charge the Silk & Dress Goods Exchange note to their account.
Additional data on the mortgage transaction are given under “Cash Disbursements.” In the general journal entry make explanation of the entire transaction, including the cash portion, which will of course be entered formally only in the cash book. In the cash book entry, by way of explanation, give cross-reference to the general journal explanation.
XIV
Summarize the subsidiary journals.
Post completely.
Take a trial balance of the general ledger as of June 30.
Prove the totals of the subsidiary accounts against their respective controlling accounts.
XV
Prepare a work sheet, as of June 30, 19—, for the six months, taking account of the following adjustments and inventories. Follow carefully the form shown in Chapter XXVII.
Accrued Expenses:
Salesmen’s salaries $485.
Shipping clerks’ and chauffeurs’ wages $265.
Unpaid garage bills $182.50.
Freight bills $55.60.
Office salaries $287.50.
Lighting expense estimate $25.
Watchman’s and cleaners’ wages $106.
Taxes $300.
Prepaid Expenses:
Advertising $3,000.
Rent $1,250.
Insurance $790.
Merchants’ Association dues $50.
Interest on note payable to the order of the
Associated Dry Goods Co. $57.21.
Interest on the note due the Merchants’ National Bank $12.50.
Accrued Income:
Interest on Liberty bonds $47.50.
Interest on the note of Charles L. Sutton & Co. $46.67.
Word has been received from the attorneys that the note of
the Silk & Dress Goods Exchange, which had been extended
and not paid when presented, will be met in full with
accrued interest of $42.84.
Out-freight for June, $169.70.
Charge depreciation as follows: 10% per annum on office and store
furniture and fixtures; 20% per annum on delivery equipment.
Create a reserve for bad debts equal to ½ % of gross sales.
Inventories were: merchandise $102,560;
office supplies $257.80; shipping supplies $387.60.
Charge and credit the partners with interest as per the
partnership agreement.
Instructions
Do not close the books of the firm nor draw up the formal statements.
Be content for this assignment with the making of the work sheet.
Close the work sheet as usual by the transfer of the net profit from the Profit and Loss columns to the credit column of the balance sheet.
Immediately following and on the same page with the work sheet, provide for showing the distribution of profits and interest and salary adjustments. The following illustration will indicate how this may be done.
ITEMS PROFIT & LOSS X PER 36% Y PER 44% Z PER 20%
Net Profit as above $18,364
Salary Allowances $ 5,400 $2,400 $3,000
Partners’ Drawings $3,000 $3,100 $1,500
Interest on Excess Drawings 36 18 3 15
Interest on Capitals 3,000 900 600 $1,500
Balance Distributed in Profit and Loss ratio 10,000 3,600 4,400 2,000
Balance of Personal accounts to Loan accounts 3,882 4,897 1,985
$18,400 $18,400 $6,900 $6,900 $8,000 $8,000 $3,500 $3,500
The item “Net Profit as above” is taken from the work sheet. The Profit and Loss columns, in conjunction with the detailed distributions shown in the “Partners’ Personal” columns, contain all the data needed for the appropriation section of the profit and loss statement and also for distributing the net profit shown by the Profit and Loss account. By entering the drawings in the “Partners’ Personal” columns, those columns are made to develop the amount of undrawn profits of each partner. They thus contain the same information which the respective personal accounts will contain after the ledger is closed. The work sheet, with this appended analysis of profits and partners’ personal accounts, thus contains all of the information needed both for drawing up the formal statements and for adjusting and closing the books.
XVI
Draw up a pro forma balance sheet and a statement of profit and loss for the six months for Cotten, Wooster & Company. In drawing up the balance sheet, head it as follows:
Exhibit A
Cotten, Wooster & Company Balance Sheet June 30, 19—
Show the total of all customers’ accounts as “Accounts Receivable (See Schedule A-1).” Attach to the balance sheet a list or schedule of all customers’ accounts to support the title “Accounts Receivable (See Schedule A-1),” carried in the balance sheet. Give to it as a formal heading:
Schedule A-1
Cotten, Wooster & Company List of Accounts Receivable June 30, 19—
The data for the schedule come from the customers ledger list or trial balance for June 30.
Attach schedules also for the other groups of items appearing in the balance sheet, viz.: Deferred Charges to Operation under which include in addition to the other items listed, the office supplies and packing materials still on hand; Accrued Income; Accounts Payable; and Accrued Expenses.
The use of schedules relieves the balance sheet of much detail and renders it more intelligible; it also makes the detail available if desired.
Set up the net worth section as follows:
Net Worth
Represented by:
C. Allen Cotten:
Capital $ . . . . . . . .
Undrawn Profits (See Schedule A-6) . . . . . . . . $ . . . . . . . .
Scott Wooster:
Capital $ . . . . . . . .
Undrawn Profits (See Schedule A-6) . . . . . . . . . . . . . . . .
Etc.
Supporting Schedule A-6 will appear as follows:
Schedule A-6
Cotten, Wooster & Company
Undrawn Profits, June 30, 19—
DISTRIBUTIONS OF PROFITS COTTEN 36% WOOSTER 44% WOOLSEY 20%
Salary for the half-year $ . . . . . . . . $ . . . . . . . .
Interest on capital . . . . . . . . . . . . . . . . $ . . . . . . . .
Share of Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . .
Totals $ . . . . . . . . $ . . . . . . . . $ . . . . . . . .
Deduct:
Interest on overdrafts $ . . . . . . . . $ . . . . . . . . $ . . . . . . . .
Drawings for the half-year . . . . . . . . . . . . . . . . . . . . . . . .
Totals $ . . . . . . . . $ . . . . . . . . $ . . . . . . . .
Undrawn profits transferred to Loan Accounts $ . . . . . . . . $ . . . . . . . . $ . . . . . . . .
The data for this schedule are secured from the “Profits Distribution” section of the work sheet.
In drawing up the profit and loss statement refer to the forms already shown. See Chapters XXVI and XXVII. The Miscellaneous Sales item should be added to the Net Sales short-extended and their total should be full-extended, from which should be deducted Cost of Goods Sold as usual.
After the item, “Net Profit for the period,” set up the appropriation section, showing the shares of each of the partners, somewhat as follows:
Net Profit for the period $ . . . . . . . .
Add:
Interest charged to partners on overdrafts:
C. Allen Cotten $ . . . . . . . .
Scott Wooster . . . . . . . .
Landsdowne Woolsey . . . . . . . . . . . . . . . .
Amount to be distributed as: $ . . . . . . . .
Salary:
C. Allen Cotten $ . . . . . . . .
Scott Wooster . . . . . . . . $ . . . . . . . .
Interest on Capitals:
C. Allen Cotten $ . . . . . . . .
Scott Wooster . . . . . . . .
Landsdowne Woolsey . . . . . . . . . . . . . . . .
In Profit and Loss Ratio:
C. Allen Cotten, 36% $ . . . . . . . .
Scott Wooster, 44% . . . . . . . .
Landsdowne Woolsey, 20% . . . . . . . . . . . . . . . . $ . . . . . . . .
Excepting for the Accounts Receivable and Accounts Payable schedules, the detailed data for balance sheet and profit and loss statements come from the work sheet drawn up for Assignment XV. Set up the formal statements on letter size (8½ × 11) paper. Typewrite them if possible.
XVII
Using the “Adjustment” columns of the work sheet as a guide, make the adjusting entries in the general journal.
Using the profit and loss statement (including the appropriation section) as a guide, set up the closing entries in the general journal. Use the “Profits Distribution” section of the work sheet as the source of the transfer of the balances of the partners’ personal accounts to the loan accounts.
Post the adjusting and closing entries.
Rule the ledger accounts.
Take a post-closing trial balance of the general ledger.
XVIII
This set comprises a general journal; a sales journal, a sales returns and allowances journal, a purchase journal, a purchase returns and allowances journal, and the cash journals, for convenience bound together in one book; a note journal to be used as a posting medium for notes receivable and notes payable; and a general ledger, a purchase ledger, and a sales ledger, bound together in one book. Of the subsidiary journal blank, page 1 is for the sales journal, page 2 the sales returns, page 3 the purchase journal, page 4 the purchase returns, and pages 6-9 the cash journals. Of the ledger blank, pages 1-15 comprise the general ledger, pages 16-19 the sales ledger, and pages 20-22 the purchase ledger. The general journal will be used as previously, i.e., for the record of all items not otherwise specially provided for. The sales journal provides for analysis of the sales, the first column being the total or general column; the others, Dept. A, Dept. B, and Out-Freight, respectively. The sales returns and allowances journal makes provision for the same analysis as the sales journal except that there is no Out-Freight column, that not being used; the purchase journal columns are respectively, Total, Dept. A, Dept. B, and In-Freight, with the same column headings for the purchase returns and allowances journal, except as to In-Freight. The cash book columns will be, on the debit, General, Accounts Receivable, Sales Discount, and Harding National Bank; and on the credit, General, Accounts Payable, Purchase Discount, and Harding National Bank. The note journal will be analyzed, summarized, and posted just as the other subsidiary journals.
The deposit account carried with the Coolidge National Bank is an inactive one. For this reason no extra column is provided for it in the cash book.
Daily posting of items affecting customers’ and creditors’ accounts should be made, carefully observing the terms of credit.
The general journal is provided with six money columns, three of which are to be devoted to charges and the other three to credits. The debit columns are to be headed, Accounts Payable, Accounts Receivable, and General, respectively. The credit columns will be headed similarly but in the reverse order, having the General column close to the ledger folio column. All amounts to be posted to accounts in the general ledger should be recorded in the General column, and those affecting a controlling account in its respective column. The latter amounts should be posted to the subsidiary account immediately, but will not be posted to the controlling account until the general journal is summarized at the end of the month. Record will be made of transactions for the last month of the fiscal year, the previous eleven months being summarized in the trial balance given to start with.
The Business Equipment Corporation was organized and incorporated under the laws of the state of New York. Its fiscal year closes on December 31. A trial balance from the general ledger on November 30, 19—, shows as follows:
1 Harding National Bank $ 6,521.25
1 Coolidge State Bank 5,000.00
1 Consignment Accounts Receivable
1 Petty Cash 200.00
1 Notes Receivable 8,419.80
2 Accounts Receivable 146,838.05
2 Reserve for Doubtful Accounts $ 2,574.85
2 Investments 12,750.00
2 Notes Receivable Special
3 Department A, Inventory 78,769.40
3 Department B, Inventory 52,918.25
3 Delivery Equipment 13,000.00
3 Depreciation Reserve Delivery Equipment 8,000.00
4 Store and Warehouse Furniture and Fixtures 4,500.00
4 Depreciation Reserve Store and Warehouse Furniture and Fixtures 2,000.00
4 Office Furniture and Fixtures 1,250.00
4 Depreciation Reserve Office Furniture and Fixtures 500.00
5 Buildings 60,000.00
5 Depreciation Reserve Buildings 15,000.00
5 Land 10,800.00
5 Mortgage on Real Estate 35,000.00
6 Notes Payable 6,472.50
6 Accounts Payable 94,969.17
6 Dividends Payable Common
6 Dividends Payable Preferred
7 Capital Stock Common 100,000.00
7 Capital Stock Preferred 100,000.00
7 Surplus 34,792.80
8 Profit and Loss
9 Department A, Purchases 478,860.00
9 Department A, Purchases Returns and Allowances 15,678.90
9 Department B, Purchases 397,725.00
9 Department B, Purchases Returns and Allowances 12,796.40
10 In-Freight and Cartage 9,642.57
10 Department A, Sales 567,819.60
10 Department A, Sales Returns and Allowances 10,649.30
10 Department B, Sales 471,932.40
11 Department B, Sales Returns and Allowances 7,427.80
11 Salesmen’s Salaries and Commissions 29,942.70
11 Salesmen’s Traveling Expenses 17,897.60
11 Advertising 22,000.00
12 Sales General Expense 23,649.30
12 Out-Freight 472.73
12 Insurance 7,562.40
12 Office Expense 2,890.78
13 Office Supplies 3,697.40
13 General Expense 12,897.48
13 General Salaries 32,894.72
13 Interest and Bank Expense 2,344.52 586.13
14 Sales Discount 15,849.50
14 Bad Debts
14 Depreciation
14 Purchase Discount 10,297.80
15 Taxes
15 Mortgage Interest 1,050.00
15 Consignment
15 Consignment-Out
$1,478,420.55 $1,478,420.55
Instructions
Open all the above accounts in your general ledger, at the places indicated, and enter under date of December 1 the balances given in the trial balance. The number in front of the account title indicates the page on which to enter the accounts. Give each one-fourth of a page, except on page 2, where give Accounts Receivable two additional lines by shortening the space for Investments.
In the sales ledger (which is controlled by the Accounts Receivable account on the general ledger), beginning on page 16, open the following accounts, four to a page, and enter the balances as of December 1:
Alexander, Hill & Co. $ 10,187.60
Automatic Pencil Sharpener Co. 1,279.00
Browne Morse Co. 4,279.85
Clark & Smith 6,798.94
General Fireproofing Co.
Hall, Walter & Co. 2,967.09
Franklin Moffit Co. 22,897.42
Peerless Motor Co.
John B. Scrivener
Standard Truck Co. 217.90
Second Third National Bank 650.00
Willis, Dickson, Inc. 14,679.80
Yonkers Carpet Works
Sundry Customers 82,880.45
$146,838.05
In the purchase ledger (which is controlled by the Accounts Payable account on the general ledger), beginning with page 20, open the following accounts, four to a page, and enter the balances as of December 1:
American Banking Machine Co. $ 7,894.20
American Duplicator Co. 2,985.75
American Kardex Co. 6,732.84
Automatic Pencil Sharpener Co. 480.00
Apex Office Supply Co. 2,797.90
Dictation Devices Co. 5,724.75
Filing Systems & Cabinet Co. 6,894.80
Library Bureau 7,894.90
Protectograph Co. 2,147.35
Yawman & Erbe Mfg. Co. 10,897.50
Sundry Creditors 40,519.18
$ 94,969.17
The two accounts, “Sundry Customers” and “Sundry Creditors,” are used to secure volume of transactions without involving too great detail. They should be treated in all respects as personal accounts.
In the notes receivable journal, enter the following notes:
No. 84, made by Clark & Smith in our favor, for merchandise, dated September 18, 19—, for three months at 6%, amount $1,987.50.
No. 87, made by Hall, Walter & Co., in our favor, for goods purchased, dated October 5, at 6% for two months, amount $2,500.
No. 88, draft drawn by the company on Willis, Dickson, Inc., dated October 28, at 60 days, amount $2,750.
No. 91, made by Franklin Moffit Co., in our favor, for merchandise, dated November 15, at 6% for 30 days, amount $1,182.30.
Total the “Amount” column and rule it off as this amount is already in your general ledger “Notes Receivable” account.
In the notes payable journal, enter the following notes:
No. 32, made by the company in favor of the Yawman & Erbe Mfg. Co., dated October 15, for two months for $1,472.50 at 6%.
No. 31, made by the company in favor of the Harding National Bank for discount, dated October 20, at 6% for 60 days, amount $5,000.
Enter these in the notes payable journal and treat as with notes receivable above.
Your books, general and subsidiary, will now show the condition as at the beginning of business December 1.
XIX
Make record in the various books of original entry of the following transactions for December, figures at left margin indicating day of month. Where needed, directions appear at the close of each assignment.
Dec.
1. Sold Browne Morse Co., 1/10, n/30, $1,538.40 (A), and $408.75 (B)
on which the company prepaid freight and charged to them $58.85.
Received on account from Willis, Dickson, Inc. $2,000.
Paid cash on account to American Banking Machine Co., $2,000.
2. Bought of the Yawman & Erbe Mfg. Co., 2/5, n/20, $2,989.80 (A),
and $3,347.65 (B).
Sold Clark & Smith, 2/10, n/60, $3,276.40 (A), and $1,562.32 (B).
Received cash on account from Alexander, Hill & Co., $3,500.
Paid cash on account to Filing Systems & Cabinet Co. $2,000.
3. Sold General Fireproofing Co., 1/5, n/30, $2,190, (A).
Received cash from Sundry Customers $5,547.80.
Paid American Kardex Co. $3,500 on account.
5. Sold Hall, Walter & Co., 3/10, n/30, $1,279.60 (A), and $390.45 (B).
Received payment on Hall, Walter & Co. note No. 84, with interest.
Browne Morse Co. paid their bill of December 1, less 1%.
Paid American Duplicator Co., November balance less 1%.
Received $2,497.80 from Sundry Customers.
6. Bought of the Automatic Pencil Sharpener Co., 4/10, n/30, $679 (B).
Bought from Apex Office Supply Co., 1/10, n/30, $1,497.80 (A), and $896.45 (B).
Sold Peerless Motor Co., 1/10, n/60, $2,679.40 (A), and $1,243.70 (B),
with prepaid freight charged them $22.90.
Received $2,500 on account from Willis, Dickson, Inc.
Gave our 30-day note No. 33, at 6%, in favor of Library Bureau,
to apply on account, $3,000.
Paid Sundry Creditors $8,191.75.
7. Sold Second Third National Bank, 1/5, n/60, $425 (B).
Paid Yawman & Erbe bill of December 2, less 2%.
Received from Sundry Customers $2,976.80 on account.
Sold Browne Morse Co., 1/10, n/30, $1,215.60 (A), and $671.15 (B).
Clark & Smith returned goods, invoice of December 2,
$127.50 (A), and $16.18 (B).
General Fireproofing Co. paid their invoice of December 3 less 1%.
Second Third National Bank paid their November balance less 1%.
9. Bought of Dictation Devices Co., 1/10, n/30, $3,784.90 (A),
and $1,781.19 (B).
Paid cash for insurance $275.
In making a deposit at the bank, a $20 note was found
to be counterfeit.
10. A note receivable for $2,500 was received from the president,
due in six months at 6% in return for a loan made to him
by the company.
Sold Automatic Pencil Sharpener Co. $896.40 (B), 1/5, n/30.
Received cash on account from Franklin Moffit Co. $7,500.
Browne Morse Co. paid $2,000 on account.
Paid Apex Office Supply Co., $2,500 on account.
12. Bought of the Protectograph Co., n/60, $2,976.80 (B).
Sold Alexander Hill & Co., 2/5, n/30, $1,569.70 (A),
and $972.80 (B).
Hall, Walter & Co. returned goods, invoice of December 5,
$92.78 (A), and $121.47 (B).
Received balance from Clark & Smith, invoice of December 2, less 2%.
Paid Yawman & Erbe Mfg. Co. $5,000 on account; and Dictation Devices Co. $2,500.
The Second Third National Bank paid their invoice of December 7, less 1%.
13. John B. Scrivener, the secretary, withdrew for his home use
$125.80 (A), and $48.90 (B).
Sold Browne Morse, 1/10, n/30, $894.65 (A) and $1,292.45 (B).
Returned to Automatic Pencil Sharpener Co. $207 (B) of the
invoice of December 6.
Paid $890 for changing the partitions in the warehouse.
Took from stock a new sofa, $275 (A) for use in salesrooms.
14. Purchased from American Banking Machine Co., 3/10, n/30,
$1,472.85 (A), and $4,561.40 (B).
Sold Standard Truck Co., 1/10, n/30, $684.90 (A),
and $516.75 (B), with prepaid freight charged them $62.81.
Received $2,500 on account from Franklin Moffit Co.
Paid Protectograph Co. $2,000 on account.
15. Sent a consignment of Department A goods, $1,200 to
G. A. Roberts, to be sold on a 5% commission basis.
Drew a 30-day sight draft on Alexander Hill & Co. to apply
on account, $2,500, which was accepted.
Hall, Walter & Co. gave a 30-day 6% note for balance of their
bill of December 5, less 3%.
The Franklin Moffit Co. note was paid with interest.
Received from Automatic Pencil Sharpener Co. in full
settlement, the net balance due as shown by their
two accounts, advantage being taken of the discounts both ways.
Paid Yawman & Erbe note due today with interest.
Instructions
December 5. Record the interest received from Notes Receivable in the Interest and Bank Expense account.
December 10. Be sure to enter the note received from the president to the correct account.
December 13. For stock withdrawn for use of business, make entry in the general journal.
December 15. Transfer through the general journal the claim of the Automatic Pencil Sharpener Co. to their account in the sales ledger, taking into consideration the sales discount to be allowed and the purchase discount to be taken. Remember to record these amounts in the proper columns. The balance of the latter account will be offset by the credit from the cash receipts journal.
XX
Dec.
16. Bought from American Kardex Co., 3/10, n/30,
$629.50 (A), and $350.40 (B).
Bought on account of the Yonkers Carpet Works, n/90,
carpets and floor materials for showrooms. They charged
$890 for the carpets, etc., and $125 for labor in laying
them, with freight prepaid by them and charged to the
company of $22.80.
Returned to the Protectograph Co. $258 (B).
Gave Apex Office Supply Co. 30-day note at 6%,
for bill of December 6, less 1%.
The Peerless Motor Co. paid their bill of December 6, less 1%.
17. Sold Franklin Moffit Co., 1/10, n/30, $987.40 (A),
and $1,642.70 (B), with prepaid freight charged them $62.15.
Paid in-freight and cartage bills to date $569.47.
19. Bought of American Duplicator Co. $4,897 (A), n/60,
with prepaid freight $297.69.
Sold Willis, Dickson, Inc., n/10, $892.50 (A), and $274.90 (B).
The Clark & Smith note was paid with interest.
Browne Morse Co. gave the company a 30-day 6% note
for the bill of December 7, less 1%.
Drew from stock for completing showrooms, furnishings
$2,790 (A), and $650 (B).
Hall, Walter & Co. paid the company $100 for the use
of one of the motor trucks for the week.
Alexander, Hill & Co. paid their bill of December 12, less 2%.
Gave Dictation Devices Co. $2,500, 30-day note at 6%
and the balance in cash, in settlement of invoice
of December 9, less 1%.
Paid note due at bank today.
20. Sold Sundry Customers to date receiving full cash payments
$2,447.50 (A), and $1,679.35 (B).
Sold Yonkers Carpet Works Co., 1/10, n/30, $889.70 (A),
and $632.40 (B).
Paid American Banking Machine Co. $5,000 on account.
21. Returned to American Banking Machine Co. $289.50 (A),
and $186.70 (B), of invoice of December 14.
The company accepted the draft, to apply on account,
drawn by the American Kardex Co., at 60 days from
December 18, for $2,500.
Paid Filing Systems & Cabinet Co. $2,500 on account.
22. Bought from Filing Systems & Cabinet Co., 3/10, n/30,
$3,695 (A), and $4,272 (B), with prepaid freight
charges of $116.74.
Sold Clark & Smith, 2/10, n/60, $1,462.80 (A),
and $1,937.60 (B).
Hall, Walter & Co. paid $1,000 on account.
Browne Morse Co. returned goods $197.60 (A),
and $59.70 (B).
23. Word was received that one of our Sundry Customers has
gone into the hands of a receiver, owing $490, and
settlement with creditors was made on the basis of 40%
of all claims, cash being received for that amount.
Bought of Library Bureau, 1/10, n/30, $2,897 (B).
Sold Alexander, Hill & Co., 1/10, n/30, $1,785.90 (A),
and $2,476.80 (B).
Paid Library Bureau $3,000 on account.
Browne Morse Co. paid balance of their bill of December 13, less 1%.
24. The company discounted its note at the Harding National Bank
for 60 days at 6%, $5,000.
Paid balance on American Banking Machine Co. bill of
December 14, less 3%.
Bought of Yawman & Erbe Mfg. Co., 2/5, n/20, $4,567.90 (A),
and $976.50 (B).
Received on cash sales $458.60 (A), and $1,124.70 (B).
Received a check from Willis, Dickson, Inc., for $5,000.
Paid Yawman & Erbe Mfg. Co. $5,000.
Standard Truck Co. gave a 30-day note at 6% for bill of
December 14, less 1%.
27. We called to the attention of Willis, Dickson, Inc.
an undercharge of $100 in the bill of December 19
in the Department B sale.
Returned merchandise to Sundry Creditors $1,910 (A),
and $897.50 (B).
Sundry Customers returned goods $619 (A), and $1,490 (B).
Paid advertising $2,000.
Paid cash for purchases $4,209 (A), and $2,010.70 (B).
Franklin Moffit Co. paid $5,000 on account.
The Willis, Dickson, Inc. draft was given to the
bank for collection.
28. The Willis, Dickson, Inc., draft was sent back because
of insufficient funds. Protest fees paid by the bank
and charged to the company were $2.50.
Sold Sundry Customers, n/30, $5,196.40 (A), and $8,927.30 (B).
Paid the American Kardex Co. bill of December 16, less 3%.
Received payment from Clark & Smith for bill of December 22 less 2%.
Paid the Filing System & Cabinet Co.’s bill of December 22, less 3%.
Instructions
December 16. Record the purchase made from the Yonkers Carpet Works in the proper column of the general journal. Charge Sales General Expense.
December 19. Credit the income received for the use of the motor truck to Sales General Expense.
December 23. Refer to page 411 of the text as to the handling of the balance of the firm’s claim against the bankrupt customer.
December 24. Cash sales will be recorded in the sales journal and included in the debit to Accounts Receivable account at time of summary. To offset this inflated debit, at the time cash sales are recorded also in the cash book the amount will be entered there in the Accounts Receivable column—not the General Ledger—and will thus be included in the credit to the Accounts Receivable account.
December 27. Record the Willis, Dickson, Inc. undercharge in the sales journal.
The entry of cash purchases is similar to that of cash sales.
XXI
Dec.
29. Upon presentation at the office of Willis, Dickson, Inc., the
draft due December 27 was paid with the protest charge.
Bought from Library Bureau, 1/10, n/30, $3,297 (B),
with in-freight $269.87.
Made partial payment to Yonkers Carpet Works $300.
30. Bought of Sundry Creditors, n/30, $11,816.80 (A),
and $16,519.70 (B).
Sold Sundry Customers, n/30, $32,279.90 (A),
and $26,819.40 (B).
Yonkers Carpet Works paid their invoice of
December 20 less 1%.
Received cash from sale of old showroom fixtures
$1,450. The fixtures cost $2,500 five years ago
and have been depreciated at the rate of 10%
per annum since that time.
Received a check for $317.90 from Standard Truck Co.;
and checks and cash from Sundry Customers $53,606.97,
less $897.48; to one of whom we issued check for $25
due to inability to make change.
31. Reimbursed petty cash for cash vouchers $116.80, and
distributed same: $62.40 to Sales General Expense;
$23.10 to Office Expense; and the balance to General Expense.
Paid Sundry Creditors, invoices of $29,467.45,
less $842.90 discount.
Paid sales salaries $4,200; salesmen’s traveling expense
$3,872.80; sales general expense $748.45; general
salaries $3,764.90; advertising for January $2,000;
general expense $1,714.92; office expense $482.70;
interest and bank expense $86.80; office supplies $287.95.
The statement from the bank as of December 31 showed the following:
Items not entered on the Business Equipment Corporation books:
Interest credited, $24.79
Collection charges, 2.36
Checks outstanding:
#1296, $1,347.60
#1314, 75.80
#1315, 16.82
#1318, 192.47
#1329, 181.64
#1331, 296.70
#1342, 897.60
A check from a sundry customer for $100, deposited on December 30, was returned by the bank as uncollectible. The company had not yet been informed of this.
Balance by bank was $14,848.73.
Reconcile the bank statement with the cash book balance shown previous to the entry in the cash book of any items from the bank statement, and determine the true cash balance.
Summarize all books of original entry. Posting of these summary entries and any other unposted items will be deferred to the next assignment.
Instructions
December 30. Refer to pages 416-418 of the text as to the proper record to be made of the sale of the old showroom fixtures. Credit the gain on this sale to the Sales General Expense.
December 31. The amount of check for $25 is included in the amount received from sundry customers.
In summarizing the general journal, first foot all the columns and underline the totals. On the following lines write the summary entry which will appear as follows:
General General
. . . . . . . General Ledger ✔
. . . . . . . Accounts Receivable
. . . . . . . Accounts Payable
General Ledger . . . . . . .
Accounts Receivable . . . . . . .
Accounts Payable . . . . . . .
Since the items making up the “General Ledger” totals have already been posted, these totals will be checked and will not be posted.
In summarizing the sales journal, the cash sales need not be segregated from the credit sales in the summary entry, inasmuch as the inclusion of such receipts in the total to be posted to Accounts Receivable from the cash receipts journal will eliminate the inflation of the claims against customers shown by the controlling account.
The purchase journal will be summarized in the same way as the sales journal.
The items shown on the bank statement but not yet entered in the cash book are to be entered there before summarizing the cash book. See page 562 for instructions as to its summary.
For summarizing the other journals follow the explanations given in Chapter XXXI.
XXII
Post completely.
Take a trial balance of the general ledger, recording it on a double sheet of journal paper. When posting customers’ and creditors’ accounts, make sure that the corresponding controlling accounts will receive, either in totals or in items, the same amounts.
Prove your sales and purchase ledgers and record the proof with the general ledger trial balance, i.e., make a list or schedule of the accounts and show the list totals as agreeing with their respective controlling account balances in the general ledger trial balance.
XXIII
Prepare a work sheet for the year ending December 31, 19—, taking the following adjustments into consideration:
Accrued Expenses:
Salesmen’s salaries $385.
General Salaries $416.90.
Amount due on repairs to building $500.
Mortgage interest $1,050.
Interest on notes: Library Bureau note $12.50;
Apex Office
Supply Co. note $5.92;
Dictation Devices Co. note $5.
Accrued freight bills $824.34.
Accrued taxes $378.
Chauffeurs’ wages $160.60.
Garage bills $216 ($100 for gasoline and balance for repairs).
Automobile tire $90.
Prepaid Expenses:
Interest on note discounted at the Harding National Bank $44.17.
Advertising $2,000. Insurance $2,867.90.
Prepaid dues to Merchants’ Association $50.
Accrued Income:
Interest on following notes: notes receivable special $8.75;
Hall, Walter & Co. $3.77;
Browne Morse Co. $3.73;
Standard Truck Co. $1.46.
Bank interest on inactive deposit with Coolidge State Bank $24.36.
Upon analysis, $387.86 of the freight bills was found to be
out-freight.
Take into account depreciation at the yearly rates of: 3%
on buildings; 20% on delivery equipment; 10% on office
furniture and fixtures.
No depreciation is to be charged on the store and warehouse
furniture and fixtures just installed.
Create a reserve for doubtful accounts equal to 1/2% of net sales.
Inventories showed the following on hand:
Department A $79,897.80;
Department B $51,764.32;
office supplies $296.45.
In-freight was apportioned between the departments on the
basis of net purchases.
Charge 90% of insurance expense to selling expenses.
In answer to our request, G. A. Roberts submitted the following information regarding his consignment:
Sales to customers $800.00
Expenses paid by him:
Freight and drayage $58.22
Insurance 12.54
A formal account sales will not be rendered till completion of sales of entire consignment. The quantities of unsold articles reported showed, upon pricing, a valuation of $600. Word was also received that a check for the amount due on sales as above would follow immediately after certification by the bank. It was decided to defer one-half of the above expenses reported by the consignee as applicable to the remainder of the consignment.
The Board of Directors declared the regular semiannual dividend of 4% on the preferred stock, payable January 25, and a 4% dividend on the common stock, also payable January 25.
Analysis, based on vouchers and invoices, showed the following content of the Sales General Expense account before adjustment:
Garage rent $1,800.00
Chauffeurs’ wages 8,969.34
Shipping clerks’ wages 2,775.13
Gasoline and oil 2,491.68
Licenses, Trucks 96.00
Repairs 895.46
Stationery, supplies, and postage 1,237.29
Tires and tubes 714.78
Crates, boxes, and shipping supplies 1,374.30
Light and heat 3,775.37
Carpets and labor for showroom 1,037.80
Sundries 330.80
Profit on sale of old storage and
warehouse furniture and fixtures 200.00
Renting of truck 100.00
Likewise, a similar analysis of the General Expense account before adjustment showed the following distribution:
Cleaners’ and watchman’s wages $4,369.75
Repairs to buildings 2,174.65
Changes in partitions 1,215.79
Auditor’s fees 1,500.00
Legal fees 2,500.00
Contributions 1,000.00
Light and heat 1,869.43
Merchants’ Association dues 100.00
Sundries 824.08
Instructions
Refer to Chapter XLVIII of the text as to consignments. In this case make use of the Consignment Accounts Receivable account for recording the claim against the consignee, and be careful to charge the proper amount of expenses against the income to be taken into the earnings for this period. Handle the deferred expense items on the consignments in the Out-Freight account. Do not forget to adjust the memorandum accounts so that they will show the value of goods still out on consignment, and take the latter amount into consideration when setting up the final inventories on the books.
XXIV
Using the work sheet as a guide, draw up pro forma balance sheet and statement of profit and loss for the year ending December 31, 19—. Show the gross profit on the sales of each department. Support both the balance sheet and the profit and loss statement with properly set-up schedule.
Instructions
Balance Sheet. Where the number of accrued and deferred items is small, they may be shown on the face of the balance sheet or in attached schedules as preferred. See page 577 for form of schedules.
Profit and Loss Statement. Where the record of the period’s business has been made by departments, it is desirable that the summary for the period show departmental results, at least so far as the gross profit stage. To get rid of the detail on the face of the statement, schedules may be appended showing such items as Cost of Goods Sold, the group of Selling Expenses, the group of General Administrative Expenses, etc. Such a statement of profit and loss, supported by schedules, is called a condensed profit and loss statement. Such a statement for a departmental business is shown by the following illustration. Only Schedule B-1 is given; the other schedules are merely lists with their totals shown.
Exhibit B
Jackson Edwards Company Statement of Profit and Loss For the Year Ending December 31, 19—
Department A Department B Total
Sales $100,000.00 $150,000.00 $250,000.00
Less—Returns and Allowances 5,000.00 6,000.00 11,000.00
Net Sales $ 95,000.00 $144,000.00 $239,000.00
Cost of Goods Sold (Schedule B-1) 60,000.00 90,000.00 150,000.00
Gross Profit $ 35,000.00 $ 54,000.00 $ 89,000.00
Selling Expenses (Schedule B-2) $ 35,000.00
General Administrative Expenses (Schedule B-3) 20,000.00
Financial Management Expenses (Schedule B-4) 5,000.00 60,000.00
Financial Management Income (Schedule B-5) 2,000.00 58,000.00
Net Profit $ 31,000.00
Schedule B-1
Jackson Edwards Company Cost of Goods Sold For the Year Ending December 31, 19—
Department A Department B Total
Inventory, January 1, 19— $12,000.00 $ 18,000.00 $ 30,000.00
Purchases 60,000.00 87,500.00 147,500.00
In-Freight 3,500.00 5,000.00 8,500.00
$75,500.00 $110,500.00 $186,000.00
Deduct:
Purchase Returns $ 2,000.00 $ 3,000.00 $ 5,000.00
Inventory, December 31, 19— 13,500.00 17,500.00 31,000.00
$15,500.00 $20,500.00 $36,000.00
Cost of Goods Sold $60,000.00 $90,000.00 $150,000.00
In preparing the schedules of expenses, refer to the previous assignment for the analysis of the Sales General Expenses and General Expense accounts.
Analyze the Interest and Bank Expense account into expense and income, and show these items separately in the statements.
XXV
Adjust and close the ledger through the general journal in accordance with the data given in Assignment XXIII.
XXVI
1. The sales of the Radcliffe Company last year January to June, amounted to $752,465. It is estimated that the price level for the current year will be 10% lower than a year ago. Due to plans for increased publicity and sales effort, it is expected that the volume of sales for the corresponding period this year will be 15% larger than last year’s. The average rate of turnover is 3½ and the mark-on is 35%.
What will be the average amount of capital required to finance the merchandise stock?
2. In establishing a buying quota for a three-month period, the Gotham Novelty Company has available from its records the following data: present inventory at retail $79,800; sales corresponding period last year $316,000; estimated sales volume this year same as last but 15% less in value. It is thought that the rate of turnover can be increased. It is therefore decided to reduce the stock carried so that at the close of the period there will be on hand a stock 20% less in volume.
Assuming that the price level is 15% less at the end of the period and that the mark-on is 40%, determine the company’s buying quota for the period.
3. The sales representative of the Natty Uniform Company is making his regular call on the Salem Dry Goods Co., whose buyer has just secured the following data from the accounting department:
Salesroom stock on hand at beginning of period $32,000.
Additions to salesroom stock to date $45,000.
Sales to date $52,000.
Stocks in transit and on present order $15,000
There is no stock in the warehouse.
Planned sales for the period are $75,000 but a revised
estimate calls for a 10% increase.
Stock planned to be on hand at the end of the period
is $25,000.
Is the buyer open to buy and, if so, how much?
4. Your Notes Receivable account shows $25,000 of customers’ notes on hand. Being in need of cash you discount $10,000 of these at the bank, receiving therefor a credit of $9,750 in your bank account. Fifteen days later the bank notifies you that $4,000 of these notes have been paid by their makers at maturity, but that a note for $1,000 signed by J. B. Grant has been charged back on account of non-payment.
Make all the entries, in journal form, to record the above.
5. On April 1, 19—, Jones of Trenton, N. J., ships an invoice of goods to Smith in New York. The goods are valued at $2,000, and the consignor pays freight amounting to $40, and insurance $30. The consignee pays cartage amounting to $50, and storage $40. On April 2, Jones draws a 30-day draft against Smith for $500, which is duly accepted on April 5. The goods are sold for $2,700. Smith’s commission is 5%.
Set up the necessary accounts both on the books of the consignor and on those of the consignee properly to reflect the above transactions.
6. Prepare the closing entries for the following consignment sale. The consignment was received July 8, account of William Nevins & Co., showing an invoice value of $3,750. You paid freight and cartage $87.50, and insurance $18.75. Sales were made July 16, $1,000, and July 25, $1,525, on a 5% commission basis. On July 31, upon closing your books, you inventory the unsold balance of the consigned goods as $2,500.
7. From the following data, relating only to customers and creditors, prepare as of December 31, 19—, Accounts Receivable and Accounts Payable accounts. Indicate in folio column the book of original entry from which each item is obtained.
1. Accounts receivable, balance January 1, 19— $1,200.00
2. Accounts payable, balance January 1, 19— 1,350.00
3. Sales 4,000.00
4. Purchases 2,500.00
5. Return sales 200.00
6. Return purchases 100.00
7. Cash received from customers 3,200.00
8. Discount allowed customers 100.00
9. Cash paid creditors 1,800.00
10. Discount allowed us 50.00
11. Customers’ notes indorsed to creditors 500.00
12. Notes received from customers 600.00
13. Freight paid by us for customers 40.00
14. Cash received from creditor for overpayment 20.00
15. Customer’s check deposited returned by bank 300.00
16. Customer’s note indorsed to creditor (see item 11)
dishonored and returned 250.00
17. Protest fees on above 5.00
18. Allowance for damages on goods purchased 30.00
19. Cash returned to customer for overpayment 10.00
20. In item 3 (Sales) included in total sales was one
to creditor 100.00
XXVII
1. An investment company purchased for investment $100,000 of 6% 10-year municipal debentures at 96, and $200,000 of 5% industrial bonds, 15 years to run, at 104.
How would you treat the discount and the premium in the accounts? Give the journal entries.
2. The authorized capital stock of a corporation is $500,000, divided into 5,000 shares, par value $100. Of this amount $400,000 has been subscribed and paid for in full. The corporation purchases ten shares of a dissatisfied stockholder for $75 a share, and five other stockholders each donate five shares to the company. Five shares of the purchased stock and all of the donated stock are sold for $50 a share.
(a) Draft proper entries and show the ledger accounts and balances.
(b) How would the balances of the accounts in (a) appear in a balance sheet?
(c) Give the entries and show the ledger accounts and balances if the capital stock were of no specified par value, but 5,000 shares had been issued at $80 and the other conditions remain as stated in the first paragraph.
(d) How would the balances of the accounts in (c) appear in a balance sheet?
3. J. B. Brown and L. C. Smith are partners, and in order to raise more capital and to preserve the organization they decide to incorporate. A company was duly incorporated under the name of The Eclipse Company, with an authorized capital of $800,000 divided into 8,000 shares of the par value of $100 each.
The partners agreed to sell for the sum of $800,000, payable in capital stock of the corporation at par, all rights to and title in the net assets of the partnership, exclusive of the cash, which was divided between the partners in proportion to their several interests at the time of the sale of the property.
According to the articles of partnership, Brown and Smith were equally interested in the assets, but the profits and losses were on a basis of 60% and 40% respectively.
The partnership balance sheet at the time of the sale was:
Assets Liabilities
Land and Buildings $200,000.00 Notes Payable $100,000.00
Cash 10,000.00 Accounts Payable 40,000.00
Inventories 100,000.00 Brown’s Capital 210,000.00
Accounts Receivable 150,000.00 Smith’s Capital 210,000.00
Machinery and Equipment 100,000.00
$560,000.00 $560,000.00
For the purpose of providing working capital, the partnership donated $300,000 of the capital stock to the corporation, which was sold at $50 per share.
You are required to:
(a) Close the partnership books, showing ledger accounts of partners only.
(b) Open the corporation books.
(c) Prepare a balance sheet of the corporation before sale of donated stock.
(d) Prepare a balance sheet after sale of donated stock.
4. Before making the charges referred to below, the Profit and Loss account of a corporation for the year shows a credit balance of $60,000. The accounts receivable are $40,700, and the plant and machinery account is $55,000. The 6% preferred stock is $50,000, and the common stock $150,000. It is decided:
1. To provide out of the above-named profit and loss balance 7½% depreciation on plant and machinery.
2. To write off as uncollectible $1,500 of the accounts receivable, and to make a reserve of 2% of the remainder of the accounts receivable to provide for possible losses thereon.
3. To provide for the preferred stock dividend for the year.
4. To provide for a bonus of $7,500 to the employees.
5. To provide for a dividend on the common stock of 15% for the year.
6. To carry the balance then remaining on the Profit and Loss account to an Undivided Profits account.
Draft entries to comply with the above provisions.
5. A has $5,000 invested in a business. He sells B a half-interest for $3,000 and keeps the money. Make the entry.
6. Jones and Johnson form a copartnership, January 1, 19—, each investing $10,000. April 1, Jones pays in an additional $2,500, and Johnson draws out $1,500. August 1, Johnson pays in $3,000, and Jones withdraws $1,000. The profits for the year ending December 31, 19— are $5,000.
Prepare statements showing each partner’s investment and portion of profits, the profits being divided in proportion to capital invested and the time it is employed.
7. A, B, and C agree to start in business with a capital of $200,000, of which A is to furnish $100,000, and B and C $50,000 each. A is to have one half-interest in the business, and B and C each one-quarter. Interest at 5% is to be credited on excess, or charged on deficiency of capital. A contributes $100,000; B $45,000; and C $40,000.
How would the capital accounts stand on the books after adjusting the interest at the end of the year?
8. A and B are partners sharing losses and gains equally. A invested $3,000, and B invested $4,000. They are ready to wind up the business. The firm owes $5,000, of which $1,000 is due A and $500 is due B. They have $7,000 in cash.
Prepare the accounts showing the closing.
XXVIII
1. The cash book of the Chicago Grocery Company on December 31, 19—, shows a balance of $10,280.72 on deposit with the National City Bank of New York. The bank statement received by the firm as of the same date shows a credit balance of $9,707.15.
The firm finds that the following checks had not cleared:
Check 1264 $ 4.00
1329 52.80
1499 1,080.70
1510 108.07
1511 2,500.00
1512 3,281.70
1513 2,223.77
1514 100.80
1515 150.17
The bank statement also shows the following items not entered in the company’s cash book: