Capital, 6/30 8,250.00
Additional Investment 250.00
--------
8,500.00
Drawings 2,000.00
--------
6,500.00
Net profit this period 2,259.50 8,759.50
-------- ========
A.B. Cornell, Personal Cr. 6 2,259.50
To carry the net profit
to Cornell’s Personal
account.
A.B. Cornell, Personal Dr. 6 259.50
A.B. Cornell, Capital Cr. 6 259.50
To transfer the balance
of profit left in the
business to Cornell’s
Capital account.
------ --------
Totals 259.50 2,519.00
====== ========
Dr. CASH CASH Cr.
===========================================================================
19— | 19—
June 30 |Dec. 31
A. B. Cornell ✔ 500.00|Purchases 3,500.00
Dec. 31 Sales 10,000.00|Morey & Co. on a/c 5 500.00 500.00
B.C. Davis on a/c 5 250.00 250.00|Jackson & Co. ” 5 600.00 600.00
C.D. Elliot ” 5 300.00 300.00|H.J. Kelsey Co. ” 5 675.00 675.00
D.E. Foley ” 5 400.00 400.00|Mortgage and
| Interest 530.00
|Clerks 750.00
|Cashier
| Stenographer, 250.00
|N.Y.C. Ry. Freight 250.00
|Horse Feed and
| Driver Expense 125.00
|Newspaper
| Advertising 300.00
|A.B. Cornell 6 2,000.00 2,000.00
|Balance 1,970.00
------ ---------| -------- ---------
950.00 11,450.00| 3,775.00 11,450.00
====== =========| ======== =========
19— |
Jan. 2 Balance 1,970.00|
SALES JOURNAL
========================================================
19—
Dec. 31 Cash 10,000.00
B. C. Davis 5 300.00
C. D. Elliot 5 400.00
D. E. Foley 5 500.00
E. F. Gaynor 5 600.00
F. G. Harvey 5 700.00
---------
Sales on Account 2,500.00
---------
Sales for Cash 10,000.00 10,000.00
---------
Total Sales 12,500.00
========= =======================
PURCHASE JOURNAL
========================================================
19—
Dec. 31 Cash 3,500.00
G. H. Jackson & Co. 5 500.00
H. J. Kelsey 5 450.00
J. K. Landon Co. 5 750.00
Morey & Co. 5 1,000.00
--------
Purchases on Account 2,700.00
---------
Purchases for Cash 3,500.00 3,500.00
--------
Total Purchases 6,200.00
========= ========================
B. C. DAVIS
===========================================================
19— | 19—
June 30 J2 50.00 | Dec. 31 C4 250.00
Dec. 31 S4 300.00 |
C. D. ELLIOT
===========================================================
19— | 19—
June 30 J2 75.00 | Dec. 31 C4 300.00
Dec. 31 S4 400.00 |
D. E. FOLEY
===========================================================
19— | 19—
June 30 J2 100.00 | Dec. 31 C4 400.00
Dec. 31 S4 500.00 |
E. F. GAYNOR
===========================================================
19— | 19—
June 30 J2 25.00 | Dec. 31 J2 250.00
Dec. 31 S4 600.00 |
F. G. HARVEY
===========================================================
19— | 19—
June 30 J2 125.00 | Dec. 31 J2 25.00
Dec. 31 S4 700.00 | ” ” ” 500.00
G. H. JACKSON & CO.
===========================================================
19— | 19—
Dec. 31 C4 600.00 | June 30 J2 250.00
| Dec. 31 P4 500.00
H. J. KELSEY
===========================================================
19— | 19—
Dec. 31 J2 20.00 | June 30 J2 375.00
” ” C4 675.00 | Dec. 31 P4 450.00
J. K. LANDON CO.
===========================================================
19— | 19—
Dec. 31 J3 1,000.00 | June 30 J3 500.00
| Dec. 31 P4 750.00
MOREY & CO.
===========================================================
19— | 19—
Dec. 31 J2 50.00 | Dec. 31 P4 1,000.00
” ” C4 500.00 |
A. B. CORNELL, PERSONAL
===========================================================
19— | 19—
Dec. 31 C4 2,000.00 | Dec. 31 J3 2,259.50
” ” J3 259.50 |
======== | ========
A. B. CORNELL, CAPITAL
==============================================================
| 19—
Net Worth (down) 8,759.50 | June 30 J2 8,250.00
| Dec. 31 J3 250.00
| ” ” J3 259.50
-------- | --------
8,759.50 | 8,759.50
======== | ====== ========
| 19—
| Jan. 1 8,759.50
LEDGER LIST (BEFORE CLOSING)
B. C. Davis $ 100.00
C. D. Elliot 175.00
D. E. Foley 200.00
E. F. Gaynor 375.00
F. G. Harvey 300.00
G. H. Jackson & Co. $ 150.00
H. J. Kelsey 130.00
J. K. Landon Co. 250.00
Morey & Co. 450.00
A. B. Cornell, Personal 2,000.00
A. B. Cornell, Capital 8,500.00
--------- ---------
$3,150.00 $ 9,480.00
3,150.00
----------
Excess of credits $ 6,330.00
==========
PROOF
Total postings from Journal $1,445.00 $10,400.00
” ” ” Sales Journal 2,500.00
” ” ” Purchase Journal 2,700.00
” ” ” Cash Book 3,775.00 950.00
--------- ----------
$7,720.00 $14,050.00
7,720.00
----------
Excess of credits as above $ 6,330.00
==========
=Net Profits.=—Inasmuch as the change in proprietorship is determined
only by a comparison of the two financial statements, at least the
result of the comparison should be incorporated into a journal entry
and so be brought into the ledger account. Sometimes the statement
itself and the calculation of change in net worth are made on the face
of the journal, thus making permanent record of them. This is worth
while since they are an essential part of the system. A permanent
statement book will accomplish the same result. In the illustration
the statement is entered in the journal. The net profit of $2,259.50
may be set up in the proprietor’s personal account, and the balance of
that account, being the amount of profits retained in the business,
transferred to the capital account; or the net amount left in the
business may be transferred directly to the capital account and the
personal account ruled off without balancing as suggested in Chapter
LIII. The same result is accomplished, but the ability to prove
postings against the books of original entry is lost. Hence the first
method which is the one shown in the illustration is the better.
APPENDIX A
PRACTICE WORK FOR STUDENT—FIRST HALF-YEAR
Accounting principles cannot be mastered without adequate practice
work. Practice work cannot be properly done unless the principles on
which it is based have been developed and explained. Practice work
should, so far as possible, follow closely after the explanation of new
principles. This applies particularly to the introductory work of the
first half-year. Later work is cumulative in its effect and may use
all principles previously developed as well as the new principles just
developed.
The practice work for the first half-year consists largely of
disconnected problems. However, a few longer problems running through
several assignments are included. Effort has been made to keep to a
minimum the purely mechanical work of computation. While emphasis
should be placed always on the principles involved, the need for
accuracy should not be lost sight of; in its practice in business,
accountancy requires accurate and, where possible, proven results.
Of the budget of stationery provided for this work, the loose-leaf
supplies—statement, journal, and ledger paper—are for the first
half-year’s work. The three-column paper is to be used for balance
sheet and profit and loss statements, unless other directions are given
for particular assignments. The use of journal and ledger paper is
indicated where necessary. Observance of directions given and of forms
to be followed, together with careful and accurate work in drafting
solutions, will save much time in the location and correction of errors.
Sufficient practice work is furnished to accompany 30 hours of lecture
or classroom work, opportunity being provided for two review periods,
one at mid-term and one at the close of the semester. Where the lecture
period is two hours in length—the class usually meeting but once a
week—two of these assignments should be given to accompany each such
lecture period. The student should make his solutions as a part of his
home-work and these should be taken up for discussion at the next class
session and correct solutions should be presented there so that always
the student may have a criterion with which to compare his own work.
Where more practice work is desired than is provided in this appendix,
a collection of miscellaneous problems is given in Appendix C.
I
1. On January 1, 19—, H. L. Lewis has the following property:
Bank deposit $1,893.74.
Merchandise $14,987.42.
Office equipment: safe, desk, counters, cash register, $850.
Delivery equipment $836.
Securities held as investments $6,950.
Accounts due him from customers as follows:
John Morris $ 90.87.
Peter Conley $135.
Chas. Grant $742.93.
Frank Hewitt $157.48.
L. M. Moore $790.72.
N. T. Taylor $48.95.
A. S. Keene $75.
For merchandise bought there remains unpaid:
To Jones Bros. $1,350.45.
” T. J. Langdon $890.
” Stewart & Co. $965.
” T. M. Lawes & Co. $4,862.97.
And a note for $125.
Draw up a statement to show H. L. Lewis’ capital as of the
above date.
2. From the following information determine the total amount of
the liabilities:
Cash in bank $840.
Goods on hand $2,500.
Accounts receivable $1,600.
Supplies on hand $320.
The year’s rent $600, was paid in advance and the premises
have now been occupied for six months.
The capital is $2,500.
3. From the following items in a balance sheet, which is complete
except as to the asset cash, determine the amount of cash:
Capital $2,500.
Supplies $87.50.
Real estate $2,500.
Ford delivery truck $575.
Accounts receivable $2,280.
Accounts payable $1,800.
Notes receivable $300.
Notes payable $500.
Salaries due but unpaid $50.
Mortgage on real estate $1,000.
4. The following data, complete excepting for the amount of a
certain mortgage and interest accrued thereon, are taken
from the records of Benjamin Goodwin for the year ending
June 30, 19—. Determine the face amount of the mortgage
payable, and the amount of the interest accrued thereon
at 6% for one year.
Cash on hand $75, and subject to check $1,200.
Factory $6,100.
Land $2,000.
Office furniture $185.
A three-year insurance premium
was bought one year ago for $300.
Accounts receivable $4,500.
Goods on hand $2,800.
Goods in process of manufacture $1,450.
Raw materials inventory $2,250.
Supplies $295.
Accounts payable $9,150.
Notes payable $4,650.
Accrued wages $135.
Mortgage payable and interest.
Capital $5,000.
5. The following was taken from the books of the treasurer
of the Yorktown Lodge:
Balance in Fifth National Bank, January 1, 19—, $689.22.
The receipts during the year were:
Proposition fees $515.
Initiation fees $2,510.
Lodge dues $4,904.60.
Interest on Liberty bonds $332.14.
Summary disbursements for the year were:
Grand lodge dues $554.
Printing and postage $818.25.
Entertainment $2,199.86.
Sundries $216.20.
Returned proposition fees $80.
Rent for lodge room $750.
Salaries $387.50.
Charity $1,211.84.
Supplies $38.80.
Testimonial dinner $846.48.
There is also cash $4,498.67, on deposit in the Irving Savings Bank
December 31, 19—, on which interest at the rate of 4% per annum
is now due for one-quarter.
The treasurer holds $10,000 in Liberty bonds.
Submit statement showing the available balance of cash for
the new year.
II
1. Make up three problems, using your own data, to
illustrate the three types of business organization.
2. On January 2, 19—, Allen B. Dawes has in his business
the following assets and liabilities which you are to
classify for balance sheet purposes according to the
definitions which have been given, changing the descriptions
here used to standard titles:
Alongside of a railroad spur, on a plot 100 by 75 feet,
costing $2,500, Dawes has erected a plant for $12,000,
for a part of which he is still indebted to the Mutual
Savings Bank, which debt is secured by a claim for $5,000
against the property.
In the plant Dawes has installed stationary operating
apparatus amounting to $19,750, and loose operating parts
and supplementary devices amounting to $250.
The value of the models and patterns which he uses amounts
to $1,215.
His stock, totaling $12,215, is in three distinct phases
or conditions:
Raw materials $4,305.
Partly finished or in process goods $4,020.
Completed stock $3,890.
In the plant Dawes has $725 worth of furniture.
In the bank he has a balance of $940 and $83.50 in the safe.
Some of his customers owe him for goods bought, the total
being $5,397.50 on open account and $875 on signed promises
to pay.
Dawes owes creditors on account $4,857.50.
He has formally acknowledged and accepted drafts amounting
to $543.50.
He is liable for a pay-roll of $150, earned but not yet due.
Draw up a statement showing assets, liabilities, and net worth,
using standard titles.
3. Dawes has reached a point where it is not only profitable
but really necessary to expand his business if he is to
retain the good-will of his old customers and secure new
ones. He has therefore persuaded Edward A. Robbins, a
capitalist, to put cash into the business equal to Dawes’
net interest and so become a partner with him.
The partnership uses $3,100 of this new capital to purchase
additional raw material, and $2,500 for some partly finished
stock (bought at a sacrifice sale). They spend $1,600 for
new machinery, $250 for tools, and $100 for new patterns.
With an eye toward future building facilities they acquire
another and adjoining strip of property with a building on
it. The latter costs them $5,470 and the land $2,500.
To facilitate securing and delivering goods, the partners
invest $1,800 in a small truck. They add shop furniture
amounting to $80.
These various deals were consummated by the early afternoon of
January 2, 19—. The partners ask you for a new balance sheet
to show the condition of the business and the respective
interests of each.
4. At the end of the year’s operation, Dawes & Robbins ask you
to draw up a statement of assets, liabilities, and net worth,
the following figures being submitted:
Balance of cash in the bank $28,000.
Accounts owing the partnership $12,000; notes $6,000.
The inventory is again split up into:
Raw materials $9,000.
Partly finished goods $5,000.
Finished stock $500.
Still on hand unused:
Advertising material $640.
Oil, waste, and supplies $500.
Packing supplies $750.
Other assets:
Models and patterns $500.
Loose tools $75.
Shop furniture is to be shown at the last
balance sheet figure less an estimated
depreciation in value of $161.
Machinery in the same manner less depreciation of $2,669.
Delivery equipment less depreciation of $360.
Factory less depreciation of $3,498.
Land as it was on the last balance sheet.
Liabilities are as follows:
Accounts owing to creditors $1,000.
Notes $250.
Accrued pay-roll $200.
The mortgage had been reduced to $2,000.
5. Robbins is anxious to withdraw from active participation
in the partnership. To facilitate this and to secure
additional funds with which to buy new models and other
things needed for the growing business, it had been decided
some time ago to incorporate and to dispose of some of the
stock to outsiders. The necessary steps had already been
taken. In accordance therewith the corporation takes over
the business at the values shown in the balance sheet of
Problem 4, with the exception of $14,252 cash which Robbins
retains. For the good-will of the business the corporation
gives the partners $15,000 of its capital stock. $25,000 of
the capital stock is sold to outsiders for $25,000 cash.
The rest of the capital stock is used in purchasing the
partnership.
Set up the balance sheet of the corporation.
III
1. A. K. Sutton is proprietor of hardware store.
On June 30, 19—, he has the following assets
and liabilities:
Bank deposits $1,980.47.
Notes receivable $450.
Accounts due from customers:
L. M. Taylor $190.
L. K. Jones $275.
G. Sanford $18.73.
F. Daly $87.54.
C. Baker $103.13.
Merchandise inventory $4,745.
Office equipment $135.
Delivery equipment $575.
He owes:
First National Bank $565.
Chas. Goodwin $487.97.
L. Birch $150.
H. Tuttle $92.50.
James Bros. $325.
Sutton’s 60-day promissory note for $200 with interest at 6%
is due today, but payment is deferred, with consent of
the creditor, to tomorrow morning.
On the above date Sutton buys out the automobile accessory
business of his neighbor, A. M. Lawrence, and combines it
with his own. The deal was completed on the basis of the
balance sheet submitted below, except that Lawrence is to
retain the cash. Sutton pays Lawrence in cash from his
hardware business. Lawrence’s balance sheet contains the
following items:
Cash $347.90.
Accounts receivable:
Taxi Service, Inc. $49.50.
The Market Shops $18.50.
Whitney’s Delivery Service $80.
Merchandise inventory $1,597.
Delivery equipment $475.
Office equipment $90.
Accounts payable $850.
Draw up a balance sheet to show Sutton’s condition after his
purchase of Lawrence’s business.
Why is Sutton’s net worth the same as before buying
Lawrence’s business?
_Instructions_
Show accounts receivable and accounts payable as totals, with
a supplementary schedule listing each separately.
2. From the following particulars prepare a balance sheet of
the Mountel Manufacturing Company as of December 31, 19—:
Premises $2,500.
Machinery $11,500.
Buildings $5,300.
Capital stock $30,000.
Stock-in-trade: finished goods $12,500;
goods in process of manufacture $8,670;
and raw materials $4,980.
Loose tools $490.
Models and patterns $650.
Patents $1,000.
Good-will $3,000.
Trade creditors $15,540.
Cash $50.
Motor truck $1,580.
Bank deposits $1,740.
Outstanding claims against customers
on open account $8,975.
A 60-day note payable for $1,000 had
been discounted at the bank at 6%
and is due in 30 days.
Office equipment $250.
Supplies $500.
Notes receivable $4,970.
First National Bank stock and other investments $4,000.
Unexpired insurance premium $150.
Accrued wages $75.
Other notes payable outstanding amount to $8,960.
Purchase money mortgage on machinery $5,500, due in 18 months.
Mortgage on buildings $2,000, due in six months.
Unpaid motor truck expense $85.
It is estimated that during the year machinery has depreciated
10% and buildings 5% from the values shown above.
Investigation shows that the present market value of finished
goods is 75% of that carried on the books, goods in process
90%, and raw materials 100%.
It is decided to reduce the values of stock-in-trade to present
price levels.
A reserve of 5% is to be created for bad debts, 50% for models
and patterns, and 20% for the delivery truck.
Loose tools are valued at $245.
3. The Cordovan Tanning Company has issued $3,000,000 of
capital stock. It suffered heavy losses due to the drop
in prices during the year. The following balance sheet
submitted to the stockholders as of December 31, 19—,
showed:
Cash on hand $1,805; on deposit $378,090.
Customers’ acceptances unmatured $249,754.
U. S. Liberty bonds $47,500.
General investments $82,950.
Loans receivable $15,280.
Income accrued on investments $3,450.
Accounts receivable $2,948,582.
Reserve for doubtful accounts $56,125.
Notes receivable $82,000.
Prepaid insurance $14,950.
Finished goods $750,000.
Goods in process $697,974.
Raw materials $460,900.
Plant and equipment, $4,980,760.
Depreciation reserve for plant and equipment was $460,640.
Accounts payable $1,980,760.
Notes payable $350,000.
Dividends payable January 15 of the next year,
and constituting a present liability of the
company $230,000.
From the following information and the balance sheet as of
December 31, 19—, prepare the balance sheet as of
December 31 one year later.
Cash on hand December 31 was $1,790; on deposit $162,875.
Customers’ acceptances unmatured $449,500.
The market value of the Liberty bonds was $46,000,
and general investments $50,000.
Loans receivable $16,000.
Income accrued on investments $1,800.
Accounts receivable $2,310,000.
Reserve for doubtful accounts $60,000.
Notes receivable $150,000.
Prepaid rent $2,400.
During the year $380,000 worth of goods was added to
finished stock, and $420,000 at cost price was sold.
It is decided that the balance must be marked down
50% to conform to market replacement costs.
Goods now in process are valued at $315,890.
Raw materials carried on the books at $670,000 are to be
written down 30% to market value.
5% of the cost of plant and equipment is to be added to
the reserve for depreciation.
Accounts payable $3,670,980.
Notes payable $1,475,000.
A dividend of 5% had been declared and was payable
January 15 of the next year.
4. By comparing the two December 31 balance sheets of the
Cordovan Tanning Company, what can you tell as to the
progress of the company during the year? Did it make a
profit or suffer a loss?
IV
1. Draw up a comparative balance sheet as of December 31,
19— of the Interurban Railway Company, from the balance
sheets of December 31, 19— and December 31 of the
previous year.
Balance sheet of 19— showed:
Cash $40,909.18.
Accounts receivable $33,097.49.
Securities deposited with Workmen’s Compensation
Commission $4,893.75.
Materials and supplies $27,112.28.
Prepaid insurance $5,732.16.
Work in progress $7,509.81.
Road and equipment $696,622.49.
Accounts payable $17,058.81.
Notes payable $70,000.
Accrued interest on first mortgage bonds $3,645.84.
Accrued taxes $6,450.65.
Depreciation reserve for road and equipment $19,995.96.
Surplus $223,725.90.
Capital stock $300,000.
First mortgage 5% bonds $175,000.
Balance sheet of the year previous showed:
Cash $34,313.78.
Accounts receivable $57,779.47.
Securities deposited with Workmen’s Compensation
Commission $4,893.75.
Materials and supplies $29,308.56.
Insurance prepaid $3,639.19.
Work in progress $98.64.
Road and equipment $694,216.73.
Depreciation reserve for road and equipment $15,813.46.
Capital stock $300,000.
Accounts payable $25,973.61.
Notes payable $100,000.
Accrued interest on bonds $3,645.84.
Accrued taxes $8,872.31.
First mortgage bonds $175,000.
Surplus $194,944.90.
2. Can you tell definitely and in detail how the increase
in surplus in Problem 1 was effected?
3. The annual report of the Northeastern Power Company for
year ending December 31, 19—, gave the following balance
sheet as of December 31, 19—:
Investments in subsidiary companies $4,244,855.57.
Cash $1,927,898.84.
Accounts receivable $1,514,605.11.
U. S. Government Liberty Loan 4¼% bonds $915,102.
Canadian Victory Loan 5½% bonds $497,769.88.
Securities deposited with State Workmen’s Compensation
Commission $8,893.75
Other securities $241,001.
Mortgages owned $13,500.
Materials and supplies $364,410.81.
Work in progress $12,931.10.
Prepaid insurance $231,350.66.
Prepaid taxes $624,744.28.
Real estate, plant and transmission systems $48,230,896.04.
Mortgage on real estate $15,000.
Accounts payable $867,763.35.
Accrued taxes $707,870.94.
Interest payable $213,896.68.
Dividends payable $201,519.50.
First mortgage 5% bonds $10,000,000.
6% refunding mortgage bonds $8,226,000.
6% debentures $10,200,000.
Depreciation reserve $2,254,476.13.
Surplus $138,932.44.
Capital stock outstanding $26,002,500.
The report for the following year gives the following particulars
as to the balance sheet of that year:
Cash $1,677,663.43.
Accounts receivable $1,286,731.23.
U. S. Liberty bonds 4¼% $1,106,452.
Canadian Victory Loan 5½% bonds $747,769.88.
Securities deposited with State Workmen’s Compensation
Commission $8,893.75.
Other securities $170,501.
Mortgages owned $15,500.
Materials and supplies $391,645.
Prepaid insurance $355,302.71.
Investments in subsidiary companies $1,406,325.67.
Prepaid taxes $607,575.33.
Real estate, plant, and transmission systems $53,470,089.04.
There were no changes in the various bond issues nor in the
capital stock during the year.
Mortgages on real estate $20,000.
Accounts payable $875,214.37.
Notes payable $1,650,000.
Accrued taxes $484,806.02.
Interest payable $215,509.58.
Dividends payable $201,519.50.
Reserves for depreciation $2,532,715.94.
Draw up a comparative balance sheet and determine the profit
for the year.
4. Make an analytical statement showing the effect on the
various assets and liabilities of the profits made during
the year.
5. Discuss these changes and so far as possible show how they
were brought about.
V
1. On December 31, 19—, James Good’s books revealed the
following facts:
Cash $25,000.
Due from customers $130,000.
Plant and equipment $100,000.
Other assets $15,000.
Due creditors for merchandise $55,000.
Accrued expenses $7,980.
Mortgage on plant $50,000.
Other liabilities $49,500.
Merchandise now on hand $67,800.
Capital at beginning of year $150,000.
Drawings during the year $10,000.
Sales $300,000.
Initial inventory $75,000.
Purchases $200,000.
Selling expenses $30,000.
General administrative expenses $27,480.
Draw up a balance sheet with the net worth section expanded
to show the operations for the year.
2. On January 2, 19—, the value of the goods on A. R. Knight’s
shelves amounted to $85,980, and he bought $275,600 worth
during the year. On December 31 of the same year the inventory
was $106,720. What was the amount of gross sales, if gross
profits were $96,000 and returned sales $17,500?
3. Expenses for conducting Knight’s business for the year
were as follows:
Salesmen’s salaries $18,750.
Advertising $2,750.
Expenses of shipments $4,580.
Office help $12,800.
Rent $18,000.
Insurance $2,500.
Supplies $5,400.
Depreciation on buildings $6,500.
Interest $5,250.
Taxes $3,920.
What was the net profit?
4. During the year 19—, the Morton Trading Company’s
books showed:
Net sales amounting to $265,000.
Purchases were $148,000, of which $7,540 worth of goods
were returned.
The cost of goods sold was 60% of the net sales and the
final inventory was $84,900.
Sales salaries $29,760.
Advertising $30,000.
Shipping expenses $4,680.
Office salaries $10,260.
Rent $4,800.
Insurance $1,500.
Depreciation of plant $6,890.
Supplies $1,230.
Taxes $4,430.
Prepare a statement of profit and loss for the year.
VI
1. The books of Alfred Gristede show the following record
at the close of business September 30, 19—:
Inventory September 1, 19—, $500,000.
Purchases $2,500,000.
Purchases returns $50,000.
Sales $3,250,000.
Sales returns $100,000.
If the gross profit is $850,000, what is the final inventory?
2. The profit and loss records of A. C. Dye for the year 19—
show the following figures:
Merchandise January 1, 19—, $235,960.
Sales $875,900.
Sales returns $6,900.
Purchases net $586,900.
Advertising $16,000.
Office salaries $22,500.
Sales salaries $34,800.
Insurance $6,300.
Taxes $21,700.
Depreciation on buildings $4,630; on motor fleet $1,875.
Accounts written off as uncollectible $36,875.
Interest on notes and accounts receivable $6,790.
Interest on notes payable $3,275.
At the end of the year the merchandise amounted to $216,735.
Draw up the statement of profit and loss for the year.
3. Prepare a formal profit and loss statement of the Lincoln
Leather Company for the year ending December 31, 19—,
from the data below taken from the company’s books:
Sales $1,559,087.
Sales returns $13,456.
Merchandise on hand January 1, 19—, $487,693.
Leather bought during the year $876,019, of which there were
returns because of defects amounting to $8,716.
Inventory on December 31, 19— disclosed $513,860 worth of
goods on hand.
Expenses of operation were:
Advertising $247,920.
Sales salaries $143,560.
Sales commissions $88,723.
Sales traveling expenses $6,423.
Freight-out $1,976.
Delivery expenses $38,976.
Rent $38,500.
Taxes $12,890.
Insurance $7,680.
Light $4,320.
Heat $15,648.
Interest paid $3,216.
Interest received $4,872.
Office salaries $27,875.
Sundry expenses $9,213.
4. The Interurban Railway Company whose comparative balance
sheet was the basis of work in Assignment IV, Problem 1,
had the following particulars for its statement of profit
and loss for the year ending December 31, 19—:
Operating revenue, i.e., income received from sale of service
to community, $152,228.11.
Other income $1,191.83.
Operating expenses $100,582.96.
Deductions from income were:
Interest on 5% first mortgage bonds $8,750.
Interest on notes payable $4,727.41.
Taxes $10,578.57.
What was the amount of the net profits for the year?
Compare this with the surplus change as developed by
the comparative balance sheet in Assignment IV, Problem 1.
5. Draw up a comparative profit and loss statement of the
Interurban Railway Company for the years ended December 31, 19—
and December 31 of the previous year from the information
submitted in Problem 4 and the following data for the year
ended December 31 of the previous year:
Operating revenues $181,016.11.
Other income $526.52.
Operating expenses $122,143.23.
Deductions from income:
Interest on the first mortgage bonds $8,750.
Interest on notes payable $6,030.
Taxes $13,634.59.
VII
1. The financial condition of the Subway Seller at the beginning
of the year is shown by the following balance sheet:
THE SUBWAY SELLER
BALANCE SHEET
January 1, 19—
_Assets_
CURRENT ASSETS:
Cash $100,000.00
Notes Receivable 15,000.00
Accounts Receivable 225,000.00
Merchandise Inventory 450,000.00
Liberty Bonds 50,000.00 $840,000.00
-----------
DEFERRED CHARGES:
Prepaid Insurance $ 25,000.00
Supplies Inventory 20,000.00 45,000.00
-----------
FIXED ASSETS:
Furniture and Fixtures $ 30,000.00
Delivery Equipment 18,000.00
Buildings 350,000.00
Land 200,000.00 598,000.00 $1,483,000.00
------------ -----------
_Liabilities_
CURRENT LIABILITIES:
Notes Payable $300,000.00
Accounts Payable 20,000.00
Accrued Expenses:
Salaries 12,000.00
Taxes 25,000.00
Interest on Mortgage 10,500.00 $367,500.00
-----------
Fixed Liabilities:
Mortgage on Land and Bldg 350,000.00 717,500.00
----------- -------------
_Net Worth_
Represented by:
Capital Stock $500,000.00
Surplus 265,500.00 $ 765,500.00
=========== =============
At the end of the year the following facts are taken from
the books of account:
The profit and loss records show:
Sales $2,125,000.
Sales returns and allowances $15,000.
Purchases for the year $1,200,000.
In-freight $15,000.
Purchase returns and allowances $8,000.
Advertising $125,000.
Sales salaries $190,000.
Delivery expense $50,000.
Depreciation on furniture and fixtures $3,000,
and on delivery equipment $2,250.
Superintendence $50,000.
Clerical salaries $75,000.
Repairs and maintenance $20,000.
Supplies $30,000.
Insurance $60,000.
Telephone and telegraph $10,000.
Bad debts $10,625.
Depreciation on building $14,000.
Taxes $30,000.
Interest on notes payable $15,000.
Interest on the mortgage $21,000.
Sales discounts $15,000.
Interest received on Liberty bonds $2,000.
Purchase discounts $24,000.
The balance sheet records show:
Cash $141,000.
Notes receivable $15,000.
Accounts receivable $335,000.
A reserve for doubtful accounts of $10,625.
Merchandise inventory $350,000.
Prepaid insurance $15,000.
Supplies inventory $30,000.
Furniture and fixtures $27,000.
Delivery equipment $15,750.
Building $336,000.
Notes payable $300,000.
Accounts payable $25,000.
Accrued sales salaries $15,000.
Accrued taxes $30,000.
Accrued interest on mortgage $10,500.
Mortgage on land and building $250,000.
Other figures on the balance sheet of January 1, 19—
have remained unchanged excepting surplus, the amount
of which you are required to determine.
From the above information:
(a) Prepare a comparative balance sheet.
(b) Prepare a statement of profit and loss.
(c) Determine the following ratios:
1. Current assets to current liabilities
2. Working capital turnover
3. Merchandise turnover
4. Accounts receivable to sales
(Assume a normal credit period of 60 days)
5. Net profit to net worth
6. Gross profit to net sales
7. Selling expenses to net sales
8. Net operating expenses to net sales
9. Net profit to net sales
2. From the following particulars taken from the books
of the United Steel Company, prepare a pro forma balance
sheet, and a statement of profit and loss:
Stocks of goods on hand from preceding year $4,964,792.
Purchases $12,945,983.
Sales $14,987,653.
Sales salaries $52,500.
Sales traveling expenses $8,613.
Sales commissions $1,780.
Cash $1,420,909.
Executive salaries $32,500.
Interest on notes payable $18,604.
Rentals $17,000.
Capital stock outstanding $38,669,600.
Interest income including the accrued, $29,911.
Real estate, plant, and equipment $34,469,867.
Trade debtors $7,082,026.
Notes receivable $302,638.
Customers’ acceptances unmatured $4,446,000.
Trade creditors $1,609,101.
Notes payable $250,000.
Repairs to plant $8,790.
Investments in subsidiary companies $3,358,933.
Advertising cost to date $35,680, exclusive of
the amount prepaid.
Telegraph $2,514.
Telephone $8,716.
Freight-out $4,978.
Demurrage $1,972.
Taxes expense $39,447, of which $17,017 is unpaid.
Surplus without taking account of the current year’s
profit is $13,678,362.
Goods now on hand $7,004,339.
Interest accrued on notes receivable $5,510.
Prepaid advertising $11,892.
Note: Show Interest Income Accrued as a current asset.
3. The warehouse of the Eastern Distributing Company is
destroyed by fire. The records at the main offices showed
that there were $785,960 worth of merchandise in the
building on January 1, 19—.
The fire occurred on October 3, 19—, and to that date
purchases had been made amounting to $2,486,475, of which
$18,920 were not yet delivered. Included in the cost of
purchases is $22,500 for freight paid.
Sales had amounted to $2,930,760. Statistical records for
the ten years previous to the loss, showed a gross profit
on sales of 51.42%.
The loss is complete except as to a small amount of goods
salvaged, the realizable value of which is estimated at
$125,000.
It is necessary, according to the terms of the fire insurance
policy, to file an immediate claim for goods destroyed.
Prepare such a claim, having due regard to a form suitable
for showing the loss.
VIII
1. Draw up from your own data the balance sheet of a corporation,
with at least twelve assets and at least five liabilities and
a total asset figure of over $250,000.
2. Making your own assumptions set up a balance sheet for the
succeeding year and a comparative balance sheet for the
two years.
3. Determine the ratios of fixed assets to capital stock,
of working capital to net worth, and of current assets to
current liabilities.
4. Write a brief statement of about 150 words giving your
opinion of the financial condition of the concern.
IX
1. Enter in ledger “T” accounts the information for the “end
of the year” given in Assignment VII, Problem 1, page 525.
2. Using the account titles in the ledger of Problem 1, draw
up a chart of accounts similar to Form 2, page 75.
3. Show and explain how the ledger of Problem 1 is the
proprietorship equation.
4. Draw up a profit and loss statement to account for the
change in proprietorship shown by Assignment VIII, Problem 2,
making your own assumptions as to items in the various
sections of the statement.
5. State the probable business transactions occurring to
bring about these changes in proprietorship (Problem 4),
i.e., show the interaction of the profit and loss elements
with the asset and liability elements in causing the changes
in financial condition.
_Instructions_
Problem 1. A ledger “T” account is a skeleton account ruled
only with the horizontal “title” line and the vertical line
separating the left section from the right, date and amount
columns being left without formal ruling.
Problem 3. The illustration on page 41 gives the form to
follow in solving this problem.
Problems 4 and 5. Make your assumptions reasonable as to the
turnover and the ratios of expenses and profit to sales.
Assume a merchandise turnover of 5, and a gross profit of
40% of sales. From these determine roughly the cost of goods
sold, the purchases, and the sales figures. Make reasonable
provision for bad debts, depreciation, interest, etc.,
in accordance with the balance sheet requirements. Make
the other expense items whatever amounts are necessary to
produce the same net profits as is shown by the comparative
balance sheet.
Follow closely the illustration in Chapter VII for the form
of solution to be used for Problem 5.
X
1. Using the schedule shown on page 82, write out three
examples of each class and show their effects in each of
the three opposite classes (27 examples).
2. Set up ledger “T” accounts for each of the illustrations
on pages 82-84, entering therein the proper amounts, debit
and credit.
XI
1. (a) Analyze the following transactions from the seller’s
viewpoint and name the debit and credit elements of
each to show:
1. The increase or decrease of assets, liabilities, and
proprietorship.
2. The account titles under each of the general groups.
The Dairymen’s League on August 1, 19— owed the Union Car
Line Company $19,780 for transportation services rendered,
and paid $9,780 cash on account, and gave a 60-day note
(6%) for $5,000.
Services to the League for the week ending August 7
totaled $2,920.
A claim of $720 was allowed the League on the 12th for
goodslost in transit.
The bill of August 7 was paid in full August 14,
less 5% for prompt payment.
On the 15th the note for $5,000 was discounted at
the bank at 6%.
(b) Set up the Dairymen’s League account on the books
of the Union Car Line Company.
2. (a) Analyze the following transactions of Samuel Lawson
and name the debit and credit elements of each to show:
1. The increase or decrease of assets, liabilities, and
proprietorship.
2. The account titles under each of the general groups.
On September 5, 19—, Lawson entered a claim for $1,000
against the Mohawk and Westchester Railroad Company for
goods bought but lost in transit on August 12.
September 16 one of Lawson’s trucks was destroyed by fire
and a claim was entered against the Shippers Fire Insurance
Company for $5,800. The truck was new and cost $7,500.
September 20 a bill for $23,400 for services was received
from the Union Transport Company.
Payment of $16,900 was made September 23 to the Transport
Company.
September 30 the claim of September 5 was paid in cash by the
M. and W. R. R. Company to Lawson, and he paid by check the
balance due the Transport Company.
(b) Set up the Union Transport Company account on the books
of Samuel Lawson.
3. (a) From the data of Problem 1, set up the Union Car Line
Company account on the books of the Dairymen’s League.
(b) From the data of Problem 2, set up the Samuel Lawson
account on the Union Transport Company books.
4. (a) Analyze the following transactions from the viewpoint
of the business and name the debit and credit elements
of each to show:
1. The increase or decrease of assets, liabilities, and
proprietorship.
2. The account titles under each of the general groups.
Balance of cash on hand July 1, 19—, $8,940.
July 2, received from cash sales over the counter $760.
July 3, received from customers in payment of notes $575.
July 5, paid for salaries $175, motor repairs $85,
advertising $325, postage $22.
July 6, discounted $1,000 6% 30-day note at the bank.
July 7:
Paid for new Ford truck $925, f.o.b. Detroit, and
freight-in on truck, $38.75; insurance $75.
Paid creditors $4,290.
Made a promissory note in favor of a creditor for $500 for
three months at 6%.
Paid note for $2,000 due on the 8th of July with interest at
6% for three months.
Bought a Liberty bond for $887.50 with accrued interest of
$16.50.
(b) Set up the Cash account.
(c) Show the account properly ruled and balanced.
5. Name the debits and credits for each of the following
transactions and set up the Notes Payable account:
On October 1, 19—, discounted 30-day 6% note for $2,500
at the bank.
Paid six months’ promissory note at 6% for $1,000 on the
10th and gave to a trade creditor our note for $3,750
due in 30 days without interest for balance of open
account.
Discounted trade customer’s three months’ 6% note for
$5,000 at bank on the 15th, the discount period being
60 days.
Paid note for $2,500 at the bank on the 31st.
6. The Willow Spring Dairy Farm purchased a new Cleveland
Tractor April 1 for $1,850, f.o.b. Cleveland. Freight
charges were $32.90; insurance in transit $15; hauling the
accessories from the station to the farm $12; attachments
cost $435; and assembling the parts cost $35. After being
used for six months the machine with accessories was sold
for $2,000.
Set up the Farm Implements account and determine the profit
or loss. Disregard depreciation.
7. On January 15 a tract of land was purchased for $32,000,
which amount included the cost of searching title $800, and
unpaid taxes at time of purchase $350. The cash paid included
all but the taxes.
On March 1 a new road was completed through the tract at
a cost of $1,250.
April 1 the unpaid taxes of $350 were paid.
August 1 assessments were levied for the state highway
amounting to $3,280.
Half of the land was sold, December 10, for $18,500.
Name the debits and credits of each of these transactions and
set up the Land account.
_Instructions_
Problems 1, 2, and 4. Set up each item somewhat in the following
manner:
Paid $9,780 cash on account (Dairymen’s League paid to
Union Car Line Company).
Debit: Increase of Assets (Cash, $9,780).
Credit: Decrease of Assets (Accounts Receivable,
Dairymen’s League $9,780).
XII
1. (a) Analyze the following transactions and name the debit and
credit elements of each to show:
1. The increase or decrease of assets, liabilities,
and proprietorship.
2. The account titles under each of the general groups.
[Refer to (b) for account titles to be used for this.]
Paid, March 1, repairs on auto truck $62.50; by check, rent $100.
March 4, $18 for office supplies; advertising circulars $128;
postage $25; telephone $18.50.
March 8, interest on borrowed money $12; new sign on door $22.
March 15, received interest on Liberty bonds $21.25.
March 18, typewriter repairs cost $8; gasoline and oil $57;
wrapping paper and general supplies $20.
March 25, advertising $75; electric light $17; insurance $15.
March 31, salaries of manager $125; office force $100;
telegrams $12.80; discount on borrowed money $5; coal $50;
sales salaries $75; traveling expenses $14.
(b) Prepare accounts with:
1. Delivery Expense
2. Advertising
3. Interest Cost
4. Interest Income
5. General Office Expense
6. Postage, Telephone, and Telegraph
7. Selling Expense
8. Cash
and set up the debits and credits of the transactions therein.
All transactionsa re for cash.
Be careful always to maintain the debit and credit equilibrium.
2. Prepare accounts with Delivery Expense, Delivery Supplies,
Delivery Wages, and Cash, and set up therein the debits and
credits of the following transactions, all of which are for
cash:
November 1, paid $5.40 for gasoline and $1.20 for oil.
November 6, bought a new inner tube for $3.50, and the
following day a new shoe for $42.50.
November 10:
Paid $4.50 for gasoline, and $1.20 for oil.
Paid the driver $35 for wages and $22.50 to the helper.
Removing carbon cost $2 and patching a tire $.50.
November 15, the car was repaired for $75.
November 18:
A short-term insurance policy for $25 was taken.
Paid the driver $35 for wages, and $22.50 to the helper.
The driver was arrested and fined $10 for passing a
trolley car while it was discharging passengers.
November 19, the car was wrecked by going down a
washed-out embankment and the helper hurt. Hospital
expenses were $50, which the
Casualty Insurance Company paid on the 25th. It cost $60
to take the car to a garage and repairs cost $275.
Suit was entered against the township for costs.
3. (a) Analyze the following transactions and name the debit
and credit elements of each to show:
1. The increase or decrease of assets, liabilities,
and proprietorship.
2. The account titles under each of the general groups.
R. C. Rockwell goes into the wholesale grocery business and
invests $20,000 in capital.
Due to a need for cash to take advantage of a favorable
purchase of securities for personal use, he withdraws $5,000
cash.
He sells some of his personal securities for $500 to buy
merchandise for the store.
He pays out of business funds household expenses of $400,
and a personal note due on his touring car for $500.
By selling two acres of land for $500 he returns the $500 he
paid on the car.
At the end of the month he transfers to his capital account
$1,000, being the debit balance in his personal account.
(b) Set up the proprietor’s capital account as carried
on the books of the grocery business.
4. (a) Analyze the following transactions and name the debit
and credit elements of each to show:
1. The increase or decrease of assets, liabilities,
and proprietorship.
2. The account titles under each of the general groups.
There is a credit balance in Profit and Loss of $4,000.
A debit balance in George B. Kelly, Personal, of $1,500.
A credit balance in George B. Kelly, Capital, of $35,000.
A debit balance in Cash of $5,000.
Mr. Kelly paid bills for the business out of personal funds:
Heat and electric light $75.60.
Water rent $25.
Store rent $400.
Gas bill $26.50.
R. G. Dun rating dues $10.
Trade association dues $15.
He received personally and retained the following amounts
due the business:
Interest on notes receivable $375.
Cash in settlement of last month’s disputed electric
light bill $15.
Rent of desk room $150.
Mr. Kelly withdrew $400 cash for personal use.
He paid for telegrams for the business $15.
He had his touring car repaired and took $75 store
cash to pay for it.
(b) Prepare accounts with:
1. Profit and Loss
2. George B. Kelly, Personal
3. George B. Kelly, Capital
4. Cash
and set up the debits and credits therein.
Transfer the net balance of Profit and Loss account to Kelly,
Personal; and transfer the net balance of the latter account
to Kelly, Capital.
XIII
1. Analyze the following transactions and name the debit
and credit elements of each to show:
1. The increase or decrease of assets, liabilities,
and proprietorship.
2. The account titles under each of the general groups.
Credit sales to customers $389,650.
Sales returns $9,480.
Inventory at beginning of year $62,780.
Credit purchases $206,240.
Purchase returns $4,760.
Cash received from customers $250,000.
Sales discounts allowed $1,280.
Purchase discounts taken $3,560.
Cash paid creditors $175,000.
Freight-in $2,670, and freight-out $3,935,
were paid in cash.
2. Bought a motor truck for $2,250, on which the freight
charges were $40 in addition. Accessories cost $150 and
of these the speedometer was later sold for $50, its cost
price. Set up the Delivery Truck account and show it
properly adjusted at the close of the period to take
account of 10% depreciation.
3. An old building cost $10,000.
Renovation with betterments $1,200.
Assessments for paving the street were $750.
An extension not joined to the main building
cost $2,000.
The extension was sold for $2,500 cash early
in the second year.
Loss by fire at the end of the third year amounted
to $3,000, which the insurance company made good
by repairing the damage.
Depreciation at 5% per annum is calculated on the
balance of the Building account at the end of
each year.
Show the Building account and its depreciation reserve at
the end of the fifth year.
4. The Office Supplies account shows $450, of which $400 is
still on hand at the end of the period. Show the account
properly adjusted and closed.
5. From the data of Problem 1, prepare a single Merchandise
account. Assume a final inventory of $75,000, and show the
account adjusted and closed.
6. Analyze the following transactions relating to a business
plant, and name the debit and credit elements of each to
show:
1. The increase or decrease of assets, liabilities,
and proprietorship.
2. The account titles under each of the general groups.
Purchased a building for $100,000 from James Jackson & Co.
Paid James Jackson & Co. $40,000 cash and executed a mortgage
for the balance.
Installed a new heating plant at a cost of $15,000 cash,
$1,000 cash being received from sale of old plant.
A new roof, at a cost of $5,000 cash, was put on.
The old roof had no value as scrap.
One year later the entire heating plant was covered with
asbestos to conserve fuel. The cost was $500 cash.
The roof was repainted at a cost of $100 cash.
Glass broken by a hail storm was replaced at a cost
of $50 cash.
Two new skylights costing $750 cash were built.
Gutters and down-spouts were replaced at a cost of $150.
XIV
1. Allowing five lines for each account and for the necessary
depreciation reserve accounts which should follow immediately
their particular assets, set up the following accounts on the
ledger in proper form and under correct titles, and take a
trial balance as of December 31, 19—.
C. M. Loomis, capital investment $50,000.
Withdrawals $3,000.
Initial inventory of merchandise $19,740.
Purchases $63,800; returns $1,524.50.
Sales $99,360; returns $1,480.
Cash in bank $2,750.
Office equipment $800.
Delivery trucks $5,000.
Accounts receivable $40,950.
Notes receivable $5,000.
Liberty bonds $5,000.
Notes payable $1,700.
Interest and discount $90, Dr.
Supplies $600.
Salesmen’s salaries $3,500.
Advertising $1,200.
Delivery expenses $569.50.
Office salaries $4,655.
Legal advice $50.
Light and heat $150.
Insurance $75.
Building $22,910.
Taxes $245.
Land $2,500.
Mortgage $10,000.
Accounts payable $18,980.
Depreciation incurred during previous years on
buildings $2,000; on delivery equipment $500.
2. Loomis’ final merchandise inventory is $20,680. He estimates
depreciation on buildings at 5%, and on delivery equipment at
10%. 5% of the outstanding accounts and notes are deemed
uncollectible. Office equipment is to be written down $300.
Unexpired insurance is $25; accrued mortgage interest $300;
accrued taxes $250; accrued sales salaries $350; and supplies
on hand $200.
Prepare a statement of profit and loss and a balance sheet.
XV
1. Give three examples each of deferred expense and income,
and accrued expense and income (12 examples). Show these
in account form after the account has been adjusted.
2. From the following particulars, take a trial balance of
the ledger of the Builders’ Supply Co. on June 30, 19—.
Warehouse $ 22,500.00
Land 7,800.00
Capital Stock 300,000.00
Surplus 50,193.00
Stock-in-Trade 245,680.00
Furniture and Fixtures 2,500.00
Good-Will 25,000.00
Trade Debtors 362,400.00
Cash 38,490.00
Trade Creditors 176,700.00
Notes Payable 15,700.00
Notes Receivable 18,900.00
Sales 589,760.00
Purchases 356,420.00
Salaries 38,900.00
Coal 4,200.00
Repairs 2,800.00
General Expenses 17,900.00
Depreciation Reserve Warehouse 5,000.00
Mortgage Payable 10,000.00
Interest Expense 475.00
Interest Income 662.00
Lighting 700.00
Telephone 600.00
Insurance 1,860.00
Taxes 890.00
Draw up a balance sheet and profit and loss statement for
the year, taking consideration of these additional data:
The merchandise on hand is $256,920.
Coal on hand $500.
Accrued mortgage interest $600.
The warehouse has depreciated 5%, and furnitures
and fixtures 10%.
3% of the Trade Debtors balance is deemed uncollectible.
Note: Do not classify expenses in the profit and loss statement.
List them under the two titles, Operating Expenses and
Non-Operating Expenses.
3. (a) Using the trial balance data of Problem 2, set up the
ledger of the Builders’ Supply Co.
(b) Close the ledger in accordance with the data given.
(c) Take a trial balance of the ledger after it is closed.
XVI
1. The following transactions are to be set up, debit and
credit, on the ledger. Use the transaction number as the
date of the month of June. Set upon your ledger the
following account titles, in the order given, allotting
to each the number of lines indicated by the numeral
following the title:
Cash 35
Notes Receivable 10
C. H. Scovil 10
M. K. Dorns 10
A. B. Sutton 10
J. P. Nevin 10
B. T. Stanton 10
C. J. Moger 10
R. B. Karell 10
Reserve for Doubtful Accounts 10
Merchandise Inventory 10
Furniture and Fixtures 10
Depreciation Reserve Furniture
and Fixtures 10
Notes Payable 10
Crew Brothers & Co. 10
Morris, Lee & Co. 10
Bondell & Co. 10
R. Kennedy 10
C. H. Wyss, Capital 10
C. H. Wyss, Personal 10
Profit and Loss 15
Sales 25
Sales Returns and Allowances 10
Purchases 15
Purchase Returns and Allowances 10
Freight-In 10
Salaries 10
General Expense 15
Depreciation 10
Bad Debts 10
Expense Supplies 10
Interest Income 10
Interest Expense 10
Purchase Discount 10
June
1. C. H. Wyss invested $10,000 cash.
He paid $5,000 cash for merchandise; and $200
for one month’s rent of a storeroom.
Bought for cash, furniture and fixtures $1,000.
2. Bought merchandise, $2,750 of Crew Brothers & Co.
on account.
Sold merchandise for cash $675.
3. Sold merchandise for cash $1,345.
Paid for office supplies $35.75.
4. Sold C. H. Scovil $500 of merchandise,
receiving $200 cash.
5. Bought office safe for $150; and typewriter for $65.
6. Bought merchandise of Morris, Lee & Co. $957.80,
paying $257.80 cash.
Gave Crew Brothers & Co. our 6% 30-day note for $1,000.
Wyss took merchandise for his own use, $50.
8. Cash sales were $1,585.
Advertising cost $275.
9. Paid salesman $22; and office clerk $18; and $24 for coal.
10. Bought merchandise for cash $480.
11. Sold R. B. Karell merchandise for $90, and took his
check in payment.
12. Paid $25 for Merchant Association dues; postage
and stationery $15.
13. Sold bill of merchandise $358.90 to M. K. Dorns,
receiving $158.90 in cash and accepting from Dorns,
at its face value, R. C. Home’s note,
non-interest-bearing, for $50, due in 10 days.
14. Gave Crew Brothers & Co. a 10-day 6% note for balance due.
Dorns returned as unsatisfactory $10 worth of merchandise
sold to him on the 13th.
XVII
1. The following transactions of C. H. Wyss are to be set up
on the ledger in the same manner as those given in the
practice data of Assignment XVI.
June
16. Cash sales were $875.55.
Paid salesman $22; and office clerk $18.
17. Paid freightbill of $35; and express $5.80.
18. Wyss drew for personal use $400 cash.
Paid electric light bill of $18.90.
19. Bought on account 2/10, net 20, merchandise
from Bondell & Co. for $5,600.
20. Cash sales were $925.50.
Sales on account to A. B. Sutton $1,275;
J. P. Nevin, $150; C. J. Moger $99.70;
and R. B. Karell $285.90.
22. Returned merchandise $400 to Bondell as unsatisfactory.
23. Paid salesman $22; and office clerk $18.
24. Received payment of R. C. Home’s note for $50.
Was allowed by Bondell & Co. $50 on claim.
25. Paid Crew Brothers & Co. note in their favor,
with interest at 6%.
C. H. Scovil paid $100 on account.
26. Paid freight $38.50.
Wyss took goods for his own use $45.
Sold B. T. Stanton $175 merchandise, receiving $50
cash and James Harvey’s note for $100 at 6% for
60 days, accepted at face value.
27. Paid telephone bill $13.90; advertising $52;
and circulars $10.
Allowed C. J. Moger’s claim for $10 for spoiled goods.
Paid Bondell & Co. amount due.
29. Cash sales were $470.
Wyss drew for private needs $200.
Collections were: A. B. Sutton $275;
J. P. Nevin $150; C. J. Moger $59.70;
and R. B. Karell $185.90.
30. Paid Morris, Lee & Co. $500 on account.
Paid salesman $22; office clerk $18.
Cash sales were $950.
Purchased from R. Kennedy a desk for store use
valued at $75, Kennedy taking merchandise to
the value of $50 in part payment and the balance
being credited.
_Instructions_
Note that the Bondell & Co. bill was paid within the
discount period. (2/10, net 20, means that 2% can be
deducted from the amount due if it is paid within 10 days
and that the face amount of the bill is due in 20 days from
date of rendering.)
XVIII
1. Take a trial balance of C. H. Wyss’ ledger completed in
Assignment XVII and record it on a piece of journal paper.
Draw up a balance sheet and profit and loss statement for
the end of the month, taking account of the following
adjustments:
Interest accrued on notes receivable $.67.
$49.53 worth of accounts and notes receivable will
probably prove to be bad. Set up a reserve on the
balance sheet.
Inventories on hand: merchandise $7,218.20; expense
supplies $25.75.
Depreciation of $11.45 on furniture and fixtures for
the month.
Interest accrued on notes payable $4.
Salaries accrued $5.71
2. The following transactions are to be entered in a purchase
journal. Make daily postings to vendor accounts and a
summary posting at the end of the month to Purchases account.
April
2. Bought from Endicott-Johnson Company, 61 Hudson St., N.Y.C.:
20 pairs men’s bluchers, black @ $ 4.75
36 pairs ladies’ single strap pumps,
patent leather @ 3.50
10 pairs men’s white buckskin @ 2.50
10. Bought from Lounsbury-Soule Company, 47 Duane St., N.Y.C.:
25 pairs men’s Scotch brogues @ $ 6.00
8 pairs men’s kangaroo bluchers @ 4.50
15. Bought from Lexington Shoe Company, 141 Duane St., N.Y.C.:
20 pairs men’s sport oxfords @ $ 4.00
15 pairs women’s sport oxfords @ 3.75
20. Bought from Charles A. Eaton, 127 Duane St., N.Y.C.:
12 pairs women’s two strap oxfords, black @ $ 2.50
6 pairs women’s pumps, black kid @ 1.75
8 pairs women’s two strap sandals, white @ 2.65
26. Bought from I. Miller, 560 Fifth Avenue, N.Y.C.:
5 pairs Russian boots @ $10.00
12 pairs riding boots @ 12.00
16 pairs single strap suede pumps @ 6.00
3. Enter the following transactions in a purchase journal
ruled for two departments—Prescription and General.
Make daily postings to vendor accounts. Summarize and
post at end of month.
May
1. Bought from Park Davis & Co., Detroit, Mich.:
For Prescription Dept. Invoice #10 2/20, n/60 $650.00
For General Dept. Invoice #11 2/20, n/60 425.00
3. Bought from Lehn & Fink, Inc., 635 Greenwich St., N. Y. C.:
For Prescription Invoice #61 1/20, n/30 $150.00
For General Invoice #62 1/20, n/30 87.50
7. Bought from Eastman Kodak Co., Rochester, N.Y.:
General Invoice #675 1/30, n/60 $126.50
13. Bought from Park & Tilford, New York City:
General Invoice #256 1/10, n/30 $ 22.50
From McKesson & Robbins, 91 Fulton St., N.Y.C.:
Prescription Invoice #27 2/20, n/60 $ 75.00
17. Bought from Hospital Specialty Co., New York City:
General Invoice #27 1/30, n/60 $ 76.00
Prescription Invoice #28 1/30, n/60 98.00
23. Bought from Crescent Drug Sundry Co., Philadelphia, Pa.:
General Invoice #75 1/30, n/60 $135.00
29. Bought from Marcus & Smith, New York City:
General Invoice #861 1/10, n/30 $ 65.00
From J. M. Dalton, New York City:
General Invoice #10,680 n/30 $ 16.00
31. Bought from Denver Pharmaceutical Co., Denver, Colo.:
Prescription Invoice #16 1/20, n/60 $165.00
From United Drug Exchange, New York City:
Prescription Invoice #205 1/30, n/60 $267.00
_Instructions_
Problem 1. Do not close the accounts in the ledger. Make
up the statements from the trial balance figures and the
adjustment data given.
Problem 2. Use two-column journal paper—the inner column
for detail and the outer column for totals. Follow Form 7
shown on page 142.
Use plain paper with “T” accounts for the ledger.
Problem 3. Use three-column journal paper. Rule in
additional lines to make it conform with Form 9 on page 144.
Follow carefully the illustration on that page in making the
entries.
Use plain paper with “T” accounts for the ledger.
XIX
1. Close C. H. Wyss’ ledger, taking account of the
adjustments mentioned in Assignment XVIII. Use the profit
and loss statement already drawn up to show the order in
which the accounts should be closed.
Take a post-closing trial balance, recording it on a piece
of journal paper, and compare it with the balance sheet.
2. The following transactions are to be entered in a sales
journal. Make daily postings to customers’ accounts and a
summary posting at the end of the month to Sales account.
April
3. Sold on account to Mrs. A. K. Foster: 3 waists @ $1.50;
1 suit $45; and 6 pairs hosiery @ $1.10.
Cash sales were $175.
7. Sold on account to Mrs. R. F. Burns: 1 evening dress $75;
1 evening cloak $125; 3 pairs hosiery @ $3.30.
To Mrs. B. J. Scott: 1 riding habit $65; 1 pair riding
boots $20; 1 riding crop $7.50; 1 riding hat $12.
Cash sales were $225.
15. Sold to Miss Alice Hanna, on account: 1 pair 18-button
gloves $7.50; 1 evening dress $45; 1 pair cut-steel
buckles $25; 1 pair evening slippers $16.
Cash sales $376.
21. Sold to Mrs. W. S. Jordan, on account: 1 evening dress
$97.50; 1 afternoon dress $72.50; 1 business suit
$45; 1 pair sandals $8.50; 1 pair evening slippers
$16; four pair hosiery $20.
Cash sales $413.
28. Sold to Mrs. Franklin Perry, on account: 1 bathing suit
$13.50; 1 pair hose $1.50; 1 pair bathing shoes $2.50;
1 rubber cap $1.75.
Cash sales, $365.
3. The following transactions are to be entered in a sales
journal ruled for two departments—Prescription and General.
Make daily postings to customers’ accounts. Summarize and
post at end of month.
May
2. Sold to Alhambra Pharmacy, Invoice #325, 1/30, n/60:
Prescription, $325; General $215.
To Alpha Drug Co., Invoice #326, 1/30, n/60: General $165.
Cash sales: Prescription $614; General $528.90.
6. Sold to Ambassador Pharmacy, Invoice #350, 1/20, n/30:
Prescription, $235; General $129.
To Anglo-American Drug Co., Invoice #352, 1/10, n/30:
Prescription $12; General $137.25.
Cash sales: Prescription $562; General $489.
10. Sold to Arcade Drug Store, Invoice #375, 1/20, n/30:
Prescription $27; General $439.
Cash sales: Prescription $281; General $314.
18. Sold to Boston Pharmacy, Invoice #401, 1/30, n/60:
Prescription $426; General $237.
To Boyer-Gordon Drug Co., Invoice #402, 1/30, n/60:
Prescription $374; General $472.
Cash sales: Prescription $489; General $654.
24. Sold to Bronx Pharmacy, Invoice #431, 1/30, n/60:
Prescription $256; General $416.
Cash sales: Prescription $617; General $529.
28. Sold to Terminal Drug Co., Invoice #465, 1/20, n/30:
Prescription $10; General $438.
Cash sales: Prescription $675; General $981.
_Instructions_
Problem 2. Use two-column journal paper—the inner column
for detail and the outer column for totals. Follow Form 7
shown on page 142.
Use plain paper with “T” accounts for the ledger.
Problem 3. Use three-column journal paper. Rule in
additional lines to make it conform with Figure 9 on page
144. Follow carefully the illustration on that page in
making the entries.
Use plain paper with “T” accounts for the ledger.
XX
1. The following transactions are to be entered in a cash
receipts journal and posted, where necessary, to ledger
accounts. At the end of the week summarize and post to
a Cash account. Follow the illustration on page 148.
May
1. A. K. Foster, on account $56.10; S. C. Kramer $66.25.
Cash sales $316.
2. Miss Alice Hanna, on account $93.50; W. S. Jordan $259.50.
Cash sales $425.
3. Cash sales $543.
5. C. A. De Forest paid his note for $1,000, due today,
with interest $15.
Mrs. Irene Brush paid on account $235.
Cash sales were $276.
6. Mrs. Lena Dupont paid on account $67.25.
E. F. Gibbs paid on account $100.
Cash sales were $347.75.
7. James W. Law, on account of his non-interest-bearing
note $126.75.
Mrs. Molly Lee, on account $257.25.
E. D. Wynne, for commission on goods sold for him, $25.
Cash sales $482.
2. Enter the following transactions in a cash disbursements
journal and post daily to “T” ledger accounts set up on
plain paper. Follow the form of journal shown on page 149.
Post total disbursements for the week to the ledger Cash
account used in Problem 1.
May
1. Paid Acme Cloak & Suit Co., on account $235;
American Cloak Co. $165.
Bought postage stamps and stamped envelopes $50.
2. Paid Green & Greenberger on account $175.
Bought office stationery $51.75.
Paid Ideal Cord & Trimming Co. on account $45.
3. Paid Lakeview Garment Co. on account $127.50;
Lang Trimming Co. on account $25.
Paid salesmen’s salaries $225.
5. Paid Empire Dress & Suit Co. on account $137.
Paid telephone bill for April $30.14.
Paid Elmer Cloak & Suit Co. $75.
Our note #25 for $1,000 came due and was paid
with interest $10.
6. Paid electric light bill for April $27.50.
Paid rent May 15 to June 15, $263.
Paid Standard Novelty Works on account $115.
7. Paid Magic Cloak & Suit Co. on account $67.50;
Textile Trimming. Works on account $75.
Paid office salaries $100.
3. The following transactions are to be entered in a cash
book, cash receipts and cash disbursements bound together.
Post daily to “T” ledger accounts set up on plain paper.
Follow Forms 10 and 11 shown on pages 148-149. Post total
receipts and total disbursements for the week to the ledger
Cash account used in Problem 1.
May
8. Balance from previous week’s transactions, $1,691.96.
Paid Green & Greenberger on account $135;
American Cloak Co. $45.
Received on account from Miss Frances Clyne $102;
and Miss Lula Fields $178.
Cash purchases were $340.25.
9. Paid Acme Cloak & Suit Co. $165;
Lakeview Garment Co. $135.
Received on account from Miss Louise Fox $215;
and Miss Alice Gaynor $176.
Cash sales were $189.
10. Paid salesmen’s salaries $230; for delivery service $150.
Received on account from Miss Katherine Kennedy $216;
and Mrs. Johanna Lambert $75.
Received rent from portion of store $50.
12. Paid Empire Dress & Suit Co. on account $150;
Elmer Cloak & Suit Co. $125.
Paid freight on purchases $41.37.
Received on account from Miss Pauline Marks $167.50.
Cash sales $576.
13. Paid telephone bill, $27; advertising bill for newspaper
insertions $75.
Received on account from Mrs. D. J. McCormack $167.
Received payment of note of J. I. Ardsley $500, and
interest $7.50.
14. Paid Daisy Cloak & Suit Co. $150 on account.
Paid office salaries $100.
Received from Miss Sue Robertson $125.
Proprietor, M. D. James, drew for personal use $50.
Cash was short $4.87.
4. The following data have been taken from the ledger of the
Port Bedford Terminal Company, on December 31, 19—.
Real Estate, Wharves, and Warehouses $30,932,394
Terminal Railway 807,052
Marine Equipment 298,994
Machinery and Electric Plant 177,588
Depreciation Reserve, Real Estate, Wharves, and Warehouses 4,187,074
Terminal Railway Depreciation Reserve 45,817
Marine Equipment Depreciation Reserve 23,942
Machinery and Plant Depreciation Reserve 16,894
Cash in Bank 192,806
Accounts Receivable 451,406
Materials and Supplies Purchases 128,894
Investments in U. S. Liberty Bonds 1,809,000
Capital Stock 15,000,000
First Mortgage 4% Gold Bonds, due August 1, 1951 12,000,000
Accounts Payable 652,644
Notes Payable 247,000
Surplus 1,231,540
Warehouse Income 2,681,694
Income from Piers 2,140,562
Sundry Income 436,353
Maintenance of Property 1,160,453
Selling and Service Costs 1,081,526
General Expenses 462,386
Taxes 681,021
Bond Interest 480,000
(a) Set these items up in the ledger.
(b) Take a trial balance.
_Instructions_
Problem 1. Use plain paper with “T” accounts for the ledger.
Problem 3. Use a double sheet of two-column journal
paper for the cash book. On the receipts side enter
the balance brought forward in the outer column. For
current and summary entry follow carefully the forms
shown on pages 148-149.
At the end of the week summarize the cash book and post
the totals to the ledger Cash account. Balance and
rule the cash book, being careful to carry forward the
balance to the next week.
XXI
1. The following transactions should be entered in a general
journal, debit and credit, with full explanation.
On November 15, 19—, John Henry and James Raymond form a
partnership to carry on a retail grocery business. Losses
and gains are to be shared equally. Each partner is to be
allowed a salary of $150 per month.
Henry invests the following assets from a business of which
he has been sole owner:
Cash $150; notes receivable $570; accounts receivable $7,320;
merchandise $24,360; furniture and fixtures $4,230.
The partnership also assumes the following liabilities
for Henry:
Notes payable $3,000; accounts payable $8,815.
Raymond invests these assets:
Cash $5,500; furniture and fixtures $2,500;
building $17,000.
2. At various times the following transactions of the
partnership occur. Record them in the journal with full
explanation.
Nov.
20. Returned goods to Austin Nichols & Co. $215;
to Bronx Sugar Co. $65; to Continental Food
Products Co. $87.50.
22. Received 30-day 6% note of J. D. Jordan for $75.
Accepted draft of Armour & Co., 60 days from sight,
in favor of the American Live Stock Co., $127.50.
24. Goods sold during previous week were returned by
Franklin K. Adams $25; Eugene Alread $35;
Preston Freeman $16.50.
26. The partners gave their 90-day 6% note to Swift &
Company, payable at the store, for $725.
28. Investigation upon a complaint from James Ortner,
a customer, showed that a sale of $150 to George
Ortner had been charged to the former in error.
Dec.
8. Made Joseph Horowitz, a customer, an allowance of $25
on account of dissatisfaction with a recent purchase.
10. Sold bill of goods $425.50, to Ben. B. Brady, receiving
cash $125.50, and J. S. Gordon’s 60-day acceptance
for the balance.
20. Purchased a plot of ground for $4,000 from the Bond &
Mortgage Co., paying $1,000 cash and executing a
mortgage for the balance.
3. The following particulars relating to Problem 4,
Assignment XX, must be taken into account to show the
true condition of the Port Bedford Terminal Co. as on
December 31, 19—:
Materials and supplies on hand $68,894.
Depreciation for the period:
On real estate, wharves, and warehouses $308,401.
On terminal railway $22,581.
On marine equipment $16,714.
On machinery and electric plant $4,978.
Estimate of uncollectible accounts $10,000.
Interest accrued on Liberty bonds $21,488.
Accrued maintenance of property $25,980.
Accrued selling and service costs $16,460.
Accrued rents on warehouses $50,000.
Accrued rents on piers $30,000.
Taxes payable $50,000.
Warehouse rents prepaid $20,000.
(a) Draw up a balance sheet for December 31, 19—.
(b) Draw up a statement of profit and loss for the
twelve months’ period ending December 31, 19—.
_Instructions_
Problem 3. The net worth section of the balance sheet should be
set up as follows:
Capital Stock $........
Surplus:
At beginning of period $........
Net profit for period ........
--------
At end of period $
------ ======
Classify the items of the profit and loss statement on the
basis of:
1. Operating income
2. Operating expenses
3. Non-operating income
4. Non-operating expenses
XXII
1. Albert Johnson and Harold Taylor enter into a
copartnership agreement for the purpose of buying and
selling Christmas novelties. Each contributes cash, no
other resources of use to this undertaking being available.
Taylor, because of wide acquaintance among manufacturers,
is to handle the buying end, and Johnson is to have charge
of the details of store management and selling. They are to
share profits and losses equally.
On November 15, 19—, operations begin. They keep a full
record of all transactions, using a cash book, purchase
journal, sales journal, general journal, and ledger. The
following accounts are kept:
Cash
Notes Receivable
M. K. Lord
C. H. Marks
K. P. Temple
L. K. Lewis
F. M. Wood
T. C. Bailey
Merchandise Inventory
Furniture and Fixtures
Notes Payable
Imbrie & Co.
Bonbright & Co.
Halsey, Stewart & Co.
B. W. Chapman & Co.
Albert Johnson, Capital
Albert Johnson, Personal
Harold Taylor, Capital
Harold Taylor, Personal
Profit and Loss
Sales
Sales Returns and Allowances
Purchases
Purchases Returns and Allowances
Freight-In
Salaries
General Expense
Expense Supplies
Bad Debts
Interest Expense
Interest Income
Purchase Discount
Enter the following transactions in their respective journals:
Nov.
15. Each partner deposits $7,500 in the firm name of Johnson
& Taylor at the Park National Bank.
Paid $1,000 for furniture and fixtures.
Paid rent $250 and advertising $100.
Bought merchandise from Imbrie & Co. $2,000, paying $500
cash, giving a note for $1,000, due in 30 days at 6%,
and the balance remaining on account.
Johnson withdrew $200 in funds for personal use.
16. Cash sales $430.80: on account to F. M. Wood $569.20;
K. P. Temple $500.
17. Bought for cash, paper and twine $29.50;
miscellaneous supplies $10.
18. Sold merchandise to M. K. Lord for $1,000, accepting his
10-day 6% note for $500 and $300 in cash.
Cash sales amounted to $450.
19. Bought a cash register for $150.
Cash sales $400.
20. Bought merchandise from Bonbright & Co. for $500, 2/10, n/30.
Paid Imbrie & Co. on account $450.
Taylor took merchandise $25, for his own use.
Cash sales were $800.
22. Cash sales were $300.
Sold on account to Lewis $950; and to Marks $350.
23. Paid Bonbright & Co. the bill of the 20th.
Paid salaries $40.
24. Sold T. C. Bailey, on account, $450 of merchandise.
Johnson took $100 cash for current needs.
The firm bought $1,400 merchandise from
Halsey, Stewart & Co.
26. Bought of B. W. Chapman & Co., merchandise $250.
Cash sales were $450.
27. The firm is notified that C. H. Marks has failed.
29. Sold bill of merchandise of $200 to T. C. Bailey,
receiving $100 in cash, and a 6% note for the balance,
due in 10 days.
Cash sales were $300.
30. Returned $50 merchandise to B. W. Chapman & Co.
Paid freight $35; insurance $15.
Lord paid note of $500 and interest.
Paid $40 in wages and gave Halsey, Stewart & Co.
a 10-day 6% note for amount due.
2. Using the adjustment data of Assignment XXI, Problem 3,
close the ledger of the Port Bedford Terminal Co. and take a
trial balance after closing.
_Instructions_
Problem 1. The purpose of this assignment is to give
practice in the operation of the five journals in a going
concern. The ledger will not be used.
Use a double sheet of two-column journal paper for the
cash book. A single sheet of two-column paper will be
sufficient for each journal.
Make full opening entry on November 15.
Do not summarize the journals until directions are given.
Note that the firm takes advantage of the Bonbright
discount offer.
Make no entry as to the Marks’ failure until further
instructions.
Problem 2. Transfer the balance of the ledger Profit and
Loss account to the Surplus account.
XXIII
1. Continue the following as in Problem 1, Assignment XXII.
Dec.
1. Johnson took $100 for personal use.
The firm paid $50 for freight bills.
T. C. Bailey returned merchandise $50.
2. Bought supplies for $18.50 cash.
Electric light bill $18, and telephone bill $12, were paid.
3. Cash sales were $240.
They received $400 on account from Bailey.
4. Lewis paid $850 on account.
Bought from Imbrie & Co. $200 of merchandise.
6. Taylor sold for $650 cash merchandise, for which the firm
had paid $1,000.
Sold on account to K. P. Temple $450; and to F. M. Wood $235.
7. Paid $40 for salaries; and $15 for supplies.
8. Paid $72 on insurance.
Bailey paid his note of $100 and interest.
9. Cash sales were $275.
The firm bought from Imbrie & Co. $675; Bonbright & Co. $800.
10. Paid Halsey note with $2.33 interest.
11. Received on account from Lord $100; and from cash sales $150.
13. Temple gave a non-interest-bearing note due in 30 days
for $500.
14. Paid freight-in bill $32; and coal bill $17.
Salaries of $40 were paid.
15. Paid note to Imbrie & Co. with interest.
The receivers of C. H. Marks paid $164, the balance of
the claim being valueless.
Summarize all journals (referring to Problem 1, Assignment XXII,
and the above) and balance the cash book.
2. The following information has been taken from the books of the
Valhalla Company after the ledger was adjusted:
Sales $2,896,745.
Sales returns $22,840.
Sales allowances $12,615.
Inventories January 1, 19—, $3,096,720.
Purchases were $1,216,000.
Purchase returns $5,675; and allowances $4,200.
Inventories on December 31, 19—, were $3,514,900.
Rent expense $54,000.
Bad debts $45,000.
Depreciation $89,700.
Advertising $50,000.
Sales salaries $686,000.
Traveling expenses $64,892.
Freight-in $17,990.
Freight-out $8,960.
Delivery expense $22,600.
Office supplies $13,400.
Lighting $4,825.
Office salaries $54,000.
Telephone $2,190.
Insurance $8,900.
Taxes $22,940.
Interest expense $7,890.
Mortgage interest $60,000.
Interest income $10,890.
Income from securities $2,400.
Sundry expenses $2,890.
Repairs $14,890.
Draw up the statement of profit and loss.
3. Draft the journal entries necessary to close the ledger
of the Valhalla Company.
4. Draw up the Profit and Loss account as it would appear
in the ledger of the Valhalla Company.
5. Anthony B. Mans is the proprietor of a drug business owning
assets and subject to liabilities as follows:
Cash $5,150.
Accounts receivable $795.
Stock of merchandise $25,340.
Store furnishings $3,420.
Soda fountain $1,250.
Notes payable $4,500.
Accounts payable $9,305.
He sells the business as above, excepting the cash which he
retains, to James R. Hart for $20,000 cash, which includes a
bonus of $3,000 for his good-will. Mans withdraws all cash
and deposits it in his personal bank account.
Make the necessary entries in Mans’ journal and cash book to
record the sale transaction and the withdrawal of cash.
XXIV
As bookkeeper for Wm. C. Baldwin, dealer in coal and coke,
you will use a general journal, a sales journal, a purchase
journal, a cash book, and a ledger. Four _double_ pages
of journal paper and three _double_ pages of ledger
paper will suffice. At the top of the first page write
“Journal of Wm. C. Baldwin.” Allow 130-150 lines for your
Journal. The next blank _double_ page will be used
for a cash book, marked on the left at the top, “Dr.” and
near the middle, “Cash.” Similarly the right page, “Cash”;
and at the top, right-hand margin, “Cr.” Allow 80-100
lines for each side of the cash book. The next blank page
mark “Sales Journal,” allowing 70-90 lines. The next blank
page mark “Purchase Journal,” allowing 1 page. The last 3
pages, reserve for trial balances and statements. Number
consecutively all pages in journal and ledger.
In the cash book use the first column on either side for
items and the second column for totals and balances.
_Balance and rule the cash book at the end of each
week_, extending the “items” total before balancing and
marking it for posting purposes “Cash, Dr.” or “Cash, Cr.”
as the case may be. Enter the balance on the “Dr.” side
in the “Total” column, and so keep each week’s receipts
segregated. At the bottom of the page, unless it happens to
coincide with the end of the week, carry “totals” of each
side forward, not the balance.
In the sales and purchase journals mark the first column “On
Account” and the second “Cash,” and make entries in them
according as sale or purchase is “on account” or “cash.”
If “cash,” entry must be made in the cash book also, in
which case check the item in the ledger folio column in
both journals, as total cash, sales, and purchases are to
be posted from their respective journals. In making summary
entries for the sales journal at the end of the month, rule
and total each column, and bring the cash column total over
on the next line into the “On Account” column, marking it
“Cash Sales, Total.” Add these two and rule off, marking
them “Sales, Cr.” The purchase journal will be handled
similarly.
Open the following accounts in your ledger, beginning on
the first page in the order given and allowing the number
of lines to each account indicated by the numeral following
each:
Cash 10
Notes Receivable 5
M. R. Hamilton 10
F. S. Kent 10
H. T. Avery 10
G. C. Furnald 10
C. P. Pell 10
S. T. Hartley 10
A. D. Livingston 10
Reserve for Doubtful Accounts 5
Coal Inventory 5
Furniture and Fixtures 10
Depreciation Reserve Furniture
and Fixtures 5
Building 5
Depreciation Reserve Building 5
Land 5
Notes Payable 10
M. H. Hanna & Co. 10
American Coke & Chemical Co. 10
Peabody & Co. 10
Seabord By-Product Coke Co. 10
Midtown Realty Co. 8
Wm. C. Baldwin, Capital 10
Wm. C. Baldwin, Personal 10
Profit and Loss 20
Sales 15
Purchases 10
Purchases Returns and Allowances 8
Freight & Delivery Inward 10
Salesmen’s Salaries 10
Advertising 10
Delivery Expense 10
Expense Supplies 15
Rent 5
Insurance 8
Office Salaries 10
Sundry Expense 8
Cash Short and Over 7
Interest Expense 8
Depreciation 5
Bad Debts 5
Interest Income 8
Before recording any transactions, study carefully the
accounts, particularly the expense accounts, which you will
keep. Make your classification strictly according to them.
Keep no additional accounts.
May 2, 19—, Wm. C. Baldwin, long interested in the coke
business, bought out the Newark Coke Company on the basis of
the values shown below.
The assets taken over were:
Stocks of coal and coke $18,902.10.
Accounts receivable:
M. R. Hamilton $6,950.
F. S. Kent $7,920.
G. C. Furnald $2,450.
C. P. Pell $7,125.
S. T. Hartley $9,840.
A. D. Livingston $2,890.
Furniture and fixtures $1,200.
A note made by G. C. Furnald for $7,800, due May 11,
after which it was to bear 9% interest. This note
was taken over at its face value.
The liabilities assumed were:
Accounts payable:
M. H. Hanna & Co. $8,942.50.
American Coke & Chemical Co. $12,437.18.
Peabody & Co. $5,647.92.
A note dated February 20, 19—, for three months at 6%,
in favor of the Seaboard By-Product Coke Co., for
$5,485.50, the accrued interest assumed being $65.83.
In addition to the above investment Baldwin opened an
account with the National City Bank for $15,000 as
working capital.
May
3. Bought for cash, account books $10; stationery $18;
stamps $25; paid rent to June 2, $500.
Sales were: on account, M. R. Hamilton $1,293.75;
for cash $890.40.
4. Bought coal and coke from M. H. Hanna & Co. on account
$6,497.95.
Paid freight-in $169.72.
Bought insurance policy for one year $360.
Sales were: on account, F. S. Kent $3,497.82; cash $614.80.
5. Paid Peabody & Co. balance due.
Sales on account: H. T. Avery $1,876.49;
G. C. Furnald $5,973.80; cash $617.90.
6. Bought from Seabord By-Product Co. on account $5,890.40.
Allowed by M. H. Hanna & Co. $400 on account of impurities
in coke.
Paid freight-in $126.72.
Sales were: on account, S. T. Hartley $3,487.60;
M. R. Hamilton $2,947.30; F. S. Kent $2,476.30;
cash $457.80.
7. Received cash on account from M. R. Hamilton $1,000;
F. S. Kent $2,750; H. T. Avery $975;
G. C. Furnald $5,250.
Paid bookkeeper $30; stenographer $25; clerks $40.
Sales for cash were $1,075.
Baldwin drew $100 in cash and $80 in coal for his home.
Paid delivery expenses $200; and sales salaries $300.
Balance, summarize, and post the cash book. The
summary entry, “Cash, Dr.,” must, for this first
week only, be set up opposite the total of the cash
receipts journal, so as to include the cash capital
invested. In all subsequent summary entries, the
“Cash, Dr.” must include only the current week’s
receipts—not the “Balance.”
9. Paid the American Coke & Chemical Co. on account $7,500;
cash for supplies $62.50; and advertising $1,000.
Sales on account: H. T. Avery $2,146.70;
G. C. Furnald $1,786.42; C. P. Pell $792.50;
A. D. Livingston $863.47.
10. Bought from the American Coke & Chemical Co. $5,746.80
on account.
Paid by check $350 for safe; and $125 for typewriter.
Received payments from C. P. Pell $2,500;
and S. T. Hartley $2,150.
11. Paid M. H. Hanna & Co. $8,942.50; paid freight-in $248.50.
Canceled $250 of order of the 10th from American Coke &
Chemical Co.
12. Sales on account: A. D. Livingston $2,387.50;
H. T. Avery $1,820.
Paid demurrage charges $290.75 by check.
_Instructions_
May 2. To determine Baldwin’s net investment and to serve
as a guide for the order of entry of the various items in
the journal, make a rough draft of balance sheet. Enter the
“cash” investment in the Journal as a part of the compound
opening entry, and also in the “Total” column of the cash
receipts journal. Check (✔) the “cash” item in the general
journal and also check the capital investment entry in the
cash receipts journal.
May 12. Charge demurrage costs to the Freight and Delivery
Inward account.
XXV
May
13. Bought from Peabody & Co. on account $4,910.
Paid freight-in $144.70; paid to M. H. Hanna & Co.,
the balance due.
Sales on account were: S. T. Hartley $1,875.20.
14. Paid bookkeeper $30; stenographer $25; clerks $40.
Cash sales for the week were $3,679.80.
Baldwin drew $200 in cash, and gave on his personal
account 5 tons of coal worth $60 to the Community
Association.
Delivery expense was $220; and sales salaries were $300.
Balance, summarize, and post the cash book.
16. Bought from M. H. Hanna & Co. on account $4,895.70.
Paid freight-in $82.93; Merchants’ Association dues $50;
stationery $55.25.
Received cash on account: G. C. Furnald $1,275;
C. P. Pell $1,350.
17. Bought a multigraph for cash $75, and paid freight on it
of $10.22.
Paid $96.17 for supplies.
Returned $800 worth of coke to M. H. Hanna & Co.
Cash was short $5.48.
Paid on account: A. D. Livingston $1,375;
M. R. Hamilton $3,500; F. S. Kent $4,035.
Sold on account: H. T. Avery $1,275; G. C. Furnald $862.70;
and C. P. Pell $1,872.60.
18. Received a 30-day 6% note from S. T. Hartley for $5,000,
to apply on account; and a note dated May 16 at 6%,
due July 16, for $3,000, from A. D. Livingston.
19. Paid $38.90 for repairs to office steps, which were
broken by accident, not chargeable to the landlord.
Canceled a $100 lot from Peabody & Co. on the last order.
Bought from the American Coke & Chemical Co. on account
$7,580.
Paid $103.72 in-freight.
20. Paid Seaboard By-Product Coke Co. note $5,485.50,
and interest.
Purchases for cash were $1,270.
21. Baldwin discounted his own note at the bank for $1,000,
for 30 days at 6%.
Paid bookkeeper $30; stenographer $25; clerks $40.
Cash sales for the week were $3,195.60.
Baldwin withdrew $400 in cash.
Paid sales salaries $300; delivery expense $235;
and American Coke & Chemical Co. $5,000 on account.
Balance, summarize, and post the cash book.
23. Sold on account: A. D. Livingston $975.70;
and M. R. Hamilton $1,392.65.
Paid Patrol Protection Service $50; and $175 to repair
heater and boiler, the latter item being allowed as
applicable to future rent.
24. Sold refuse for cash $15.80.
Bought from Peabody & Co. $2,120 on account, and paid
freight $174.37.
25. Cash was short $1.04.
Paid lighting bill of $31.75.
26. Received cash on account: F. S. Kent $1,500;
H. T. Avery $1,875; G. C. Furnald $1,000.
Sold on account: C. P. Pell $1,587; F. S. Kent $1,623.80;
A. D. Livingston $1,217.80.
27. Purchased from Peabody & Co. on account, shipment of
Pocahontas coal $900.
Bought $50 worth of stamps.
Cash was over $1.37.
28. Paid bookkeeper $30; stenographer $25; and clerks $40.
Cash sales for the week were $2,175.80.
Baldwin withdrew $250 for personal expenses.
Delivery expenses were $245; and sales salaries $300.
Paid the Seaboard By-Product Coke Co. bill of May 6.
Balance, summarize, and post the cash book.
31. Paid Peabody & Co. $1,000 on account.
Bought of M. H. Hanna & Co. on account $6,250.
Telephone bill was $52.45; and cash was over $.51 (51 cents).
Bought of Seaboard By-Product Coke Co. on account $2,890.70,
paying $52.18 in-freight.
Gave the American Coke & Chemical Co. a 90-day note
at 6% for $1,250.
A. D. Livingston paid $500 on account.
Cash sales were $480.90.
Received on account: M. R. Hamilton $3,000;
F. S. Kent $2,000; C. P. Pell $2,500.
Bought from Midtown Realty Co. the lot in which the yards
were located for $2,000, and the buildings with equipment
for $8,575, giving $5,575 in cash and executing a 6%
mortgage on private properties not carried on the books
of the business for the balance.
_Instructions_
May 14. The coal given to charity is a personal expense
of Baldwin’s.
May 31. Record the purchase of lot and building as a credit
for the entire amount to the vendor. Cancel the
liability to the vendor by entry in the cash book
for the cash portion, and in the general journal
for the mortgage.