Balance the cash book, total, and make summary entries for
the sales and purchase journals.
Post completely the sales and purchase journals, then the
general journal and cash book. Be sure to post the weekly
totals of cash receipts and cash disbursements as well as
the totals for the end of the month.
Take a trial balance of account balances and record it on
page 13 of your journals, labeling it
“Trial Balance, May 31, 19—, Wm. C. Baldwin.”
_Instructions_
Refer to pages 142, 148, 149, for the form of the various
journal summaries and to 547-548, practice data, for the
method of summarizing.
Be very careful always to cross-index every posted item in
both ledger and journals just as soon as the posting of that
item is completed. The ledger folio columns in the journals
are thus an indication as to how far the work of posting
has proceeded, in case the bookkeeper is interrupted before
completing the postings.
XXVII
Draw up a balance sheet and statement of profit and loss
for Wm. C. Baldwin, taking into account the following
adjustments and inventories:
Interest prepaid on note at bank $3.33.
Interest accrued on following notes:
G. C. Furnald $39.00
S. T. Hartley 10.83
A. D. Livingston 7.50
------
Total $57.33
Expense supplies inventory $14.50.
Insurance unexpired $330.
Merchants’ Association dues prepaid $47.92.
Delivery expenses accrued $75.
Salesmen’s salaries accrued $100.
Advertising accrued $50.
Advertising prepaid $200.
Office salaries accrued $31.67.
Prepaid rent $207.26.
Furniture and fixtures are to be depreciated at the rate
of 1% per month.
Uncollectible accounts are estimated as ½% on sales for
the month.
Coal inventory $19,352.30.
_Instructions_
Use the method of the work sheet in doing this assignment.
Follow closely the illustration in the text. After the work
sheet has proved the accuracy of the work, draw up the
formal statements.
XXVIII
1. Adjust and close Wm. C. Baldwin’s ledger, taking account
of the adjustment data given in Assignment XXVII.
2. Take a post-closing trial balance.
APPENDIX B
PRACTICE WORK FOR STUDENT—SECOND HALF-YEAR
The practice work for the second semester is designed to give facility
in the use of accounting records, and accuracy and confidence in the
handling of a volume of transactions. Accordingly, this work consists
largely of two somewhat extended problems to be recorded in blank
books. The first is a problem in partnership, involving particularly
the adjustment of partners’ accounts at the close of the fiscal period.
Many points met in the operation of records using controlling accounts
are included. The second is concerned with a trading corporation. Here
some of the problems peculiar to the corporation are met, as well as
those connected with the operation of a departmental business.
The stationery furnished provides two sets of blank books, as indicated
above, the one for the partnership, the other for the corporation.
Specific directions for their use are given with each problem. Upon
completion of the problem these blanks are to be turned in for
inspection and may be retained by the school if deemed best. A few
miscellaneous problems are also provided. The loose-leaf supplies will
usually be found suitable for their solution.
Here, also, sufficient practice work is furnished to accompany 30 hours
of lecture or classroom work. If desired, this may be supplemented by
the use of material in Appendix C. If an adequate understanding of the
use and operation of accounting records is to be secured, disconnected
problem work should not be substituted for the practice work provided
in this Appendix B.
In handling this semester’s work, the student must not allow himself
to fall behind in the preparation of the assigned work There is quite a
volume of work to be done and the material of the various assignments
is so interrelated that unless the practice work is kept up to date,
most of its value is lost through the student’s not being ready to
carry out instructions given covering the current work. Careful work
and the proving of its accuracy will prevent much waste of time in
making corrections.
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 | 3,000 | 900| 600| $1,500
Capitals | | | |
| | | |
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 | WOOSTER | WOOLSEY
| 36% | 44% | 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 Department Total
A B
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 Department Total
A B
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
=========== ===========