B 3 lib sn CL^ Practical Accounting DENNIS Practical Accounting by WILLIAM H. DENNIS B.C.S., C.P.A. Professor of the Principles and Practice of Accounting in the New York University School of Commerce, Accounts ^and Finance *^ OF THE UNIVERSITY ,, OF // THIRD EDITION 1909 63"^ H^^'P^ COPYRIGHT, 1904, 1907 BY WILLIAM H. DENNIS ^ OF THE UNIVERSITY OF // Foreword THE third edition of this work, which, as a whole, includes the form books (26 in num- ber) required to practically work out the prob- lems herein contained, is a growth of some five years of experience by the author with the classes of the School of Commerce, Accounts and Finance. It is the author's belief that it meets the require- ments of all students of accounting, who seek practical experience in a subject which can other- wise be gained only by the usual and long drawn out .clerkship. Accounting as a science, in America at least, is in its infancy, though as a practical subject, it is co-equal with business in age. With the disap- pearance of the individual, and the rapid growth of firms and associations it is becoming more and more intricate and its proper application can be had only by a thorough mastery of both the theoretical and practical, and that by men who specialize in the subject. It is hoped that this work will lead the student to appreciate the science and aid him to master a subject which more and more is engaging the energy and thought of many minds. ^ ^ ^ 193394 PART I. Part 1. February i, 1902. A. Arnold, of the City of New York, and B. Burt, of Yonkers, have this day formed a copartnership for the purpose]^of conducting a manu- facturing business under the firm name of Arnold & Burt. Arnold is to contribute, as his share of the capital of the firm, fifty thousand dollars in cash, and Burt is to contribute real estate and buildings valued at eighty thousand dollars, making the total Capital $130,000. Arnold is to receive a salary of $12,000 per annum in addition to his share of the profits. Interest is to be credited on capital invested at 6 per cent. Profits and losses are to be divided in the proportion of 60 per cent, to Arnold and 40 per cent, to Burt. The foregoing statement is to be written in the Journal. Books to be Opened. General Ledger, Customers' Ledger, Creditors' Ledger, Purchase Book, Sales Book, Petty Cash Book, Cash Book and Journal. Accounts to be Opened in the General Ledger. FOLIO. FOLIO. I Labor Account. 5 Sundry Expense. I Superintendence. 5 Discount Lost. I Raw Material. 5 Discount Gained. I Packing Material. 5 Sales. 2 Inventory. 6 Cash. 2 Heat and Power. 6 Petty Cash. 2 Factory Expense. 6 Sundry Customers' Con- 2 Freight Inward. trolling Account. 3 Cartage. 6 Real Estate. 3 Insurance. 7 Horses, Wagons and Harness. 3 Postage. 7 Machinery and Tools. 3 Stable Expense. 7 Notes Receivable. 4 Advertising. 7 Notes Payable. 4 Traveling Expense. 8 Sundry Creditors' Controlling 4 Office Salaries. Account. 4 Stationery and Printing. 8 Furniture and Fixtures. FOLIO FOLIO 8 Reserve for Depreciation of lo A. Arnold's Drawing Account. Machinery and Tools. lo B. Burt's Drawing Account. 8 Reserve for Taxes. lo C. Conant's Drawing Account. 9 Reserve for Depreciation of ii C. Conant. Horses, Wagons and Harness, ii Burt & Conant. 9 Reserve for Depreciation on 12 Manufacturing Account. Furniture and Fixtures. 12 Trading Account. 9 Reserve for Bad Debts. 13 Profit and Loss. 9 A. Arnold's Capital Account. 13 Adjustment. 10 B. Burt's Capital Account. 14 Realization and Liquidation. The first marginal letter refers to the book of orig- inal entry to be used. C. for Cash Book, P. Purchase Book, S. Sales Book, etc., etc. The next two or more letters indicate the columns in which the item is to be entered. Viz: C, NC, GL. signifies that A. Arnold is to be cred- ited in the cash book with $50,000; first in the net cash column and again in the general ledger column. February i, 1907. A. Arnold contributes $50,000 in cash. B. Burt contributes Real Estate worth $80,000. 3rd. Purchased of the Bogota Machine Company, city, a boiler and machinery for $30,000. Purchased of the Office Supply Company, city, office furniture, $5,000. 4th. Purchased of the Howard Coal Company, city, 150 tons of coal, $450. Purchased of B. Jones, city, oil and waste, $50. 5th. Purchased of C. Williams 100 tons raw material, $5,000; 60 days or cash less 2 per cent. Purchased of L. Mead, city, 5,000 lbs. paper, $150. Purchased of the Sommerville Paper Box Com- pany, city, 1,000,000 paper boxes for $5,000 cash, less 5 per cent. 6th. P., A., RM. Purchased of Paul Burt 30 tons raw material, $900 cash, less 2 per cent. 7th. C, NC, GL. Paid Engineer's Wages, $150; Factory Hands, $250. (Charge Heat and Power $150; Labor $250.) A. Arnold drew $500. 8 c. J. , NC, GL. p. , A.,M. &T. p. ,A.,S. p. , A., H. & P. p.: , A., H. &P. P., , A., RM. P., P., , A., PM. A., PM. 9 th. P., A., S. Purchased of Tattersall & Company, city, horses, wagons, harness, $7,000. P., A., PM. Purchased of Silas Herring, city, 1,000 packing cases, $300. S., A., FG. Sold Isaac Smith, St. Louis, Mo., 1,000 cases fin- ished goods, $12,500; 60 days, note or cash, less 3 per cent. S., A., FG. Sold Abraham Oliver, Cincinnati, O., 500 cases goods, $6,250. 12th. P., A., S. & P. Purchased of Geo. F. Nesbitt & Company, city, stationery, $1,500. S., A., FG. Sold Mark Lane, St. Paul, Minn., 1,000 cases goods, $12,500. S., A., FG. Sold Matthew Maine, Portland, Me., 1,000 cases goods, $12,500. P., A., RM. Purchased of George Wallace & Company, city, 100 tons raw material, $6,000. P., A., M. & T. Purchased of Lake & Company, machinery for $650. S., A., FG. Sold Frank Patterson, Phila., Pa., 250 cases goods, $3,125. 13th. P., A., H. & P. Received from John Horn & Company, city, bill for repairs to machinery, $125. S., A., FG. Sold George Bigelow, Baltimore, 500 cases goods, $3,125. C, NC, GL. Drew $250 from the bank,, charge Petty Cash (also make an entry in the Petty Cash book in column for Receipts $250). PC, T., P. Paid for postage stamps, $30. P., A., PM. Purchased of Johnson & Company, city, 5,000 packing cases, $1,500. PC, T., FE. Paid for brooms, soap and towels for factory use, $50. 14th. P., A., RM. Purchased of Selleck & Company, 30 tons raw material, $750. C, NC, Cr. L. Paid Howard Coal "Company, city, bill of 4th inst., $450. C, NC, D., Cr. L. Paid C Williams, $4,900; discount, $100. (NET Cash, $4,900; discount, $100; creditors, $5,000.) C, NC, D., Cr. L. Paid Sommerville Paper Box Company, $4,750; discount, $250. (NET Cash, $4,750; Discount, $250; Creditors, $5,000.) C, NC, GL. Paid for Labor, $9,500; Superintendence, $250; Ofhce Salaries, $300; Stable Expense (Drivers' Wages, $150; A. Arnold, $500. PC p., ,A., .,S. s. &P. P. p., ,A., H. , &P. s., A., FG. s., A., FG. c, NC ;.,Cr •. L. s., A., FG. p.: , A., S. p., A., PC.,T H. . ., P. &P. , S. & P. Paid for pens, pencils, etc., etc., $7.50; postage stamps, $20. Received bill of Armstrong & Company for adver- tising, $25,070. 1 6 th. Purchased of the Howard Coal Company 150 tons coal, $450. Sold Lewis Welling, Trenton, N. J., 250 cases finished goods, $3,125. Sold John Lyon, Buffalo, N. Y., 500 cases finished goods, $6,250. Paid George F. Nesbitt & Company's bill of 12th, $1,500. Sold James Bruce, New Orleans, i ,000 cases finished goods, $12,500. Received Armstrong & Company's bill for adver- tising, $23,000. Received L. Herzog's bill for repairs to boiler, $245. Paid for postage stamps, $20; stationery, $40. 1 8th. PC, T., S. & P., FE. Paid for washing windows in factory, $30; sta- tionery, $25. Paid Bogota Machine Company, $15,000; Office, Supply Company, $2,500. Sold Ezra Wheeler, 1,000 cases of goods, $12,500. 19th. Paid bill of Tattersall & Company, $7,000. Sold Lewis Welling 1,000 cases of goods, $12,500. Purchased of the Bogota Machine Company, knives, $160. 20th. Paid bill of B. Jones, $50, and bill of L. Mead, $150. Sold Isaac Smith 1,000 cases goods, $12,500. Received check of Isaac Smith for bill of loth inst.,$i2,i25; discount, $3 75. (Net Cash, $12,125; Discount, $375; Customers, $12,500.) 2lSt. C, NC, GL. Paid for Labor, $10,250; Superintendence, $250; Office Salaries, $300; Engineers (Heat & Power), . $150; Drivers (Stable Expense), $150; A. Arnold, $750; Petty Cash, $250. C, NC, Cr. L. Paid Silas Herring's bill of loth inst., $300. S., A., FG. Sold Matthew Maine 1,000 cases, $12,500. 23rd. P., A., H. & P. Purchased of Howard Coal Company 150 tons coal, $450. 10 c. , NC, Cr. L. s., , A., FG. c s., p. , NC, Cr. L. A., FG. , A., M. &T. c , NC, Cr. L. s.. c , A., FG. , NC, D., Cu. L. • p., A., PM. Purchased of Johnson & Company 3,000 packing cases, $900. C, NC, D., GL. Discounted firm's note at Fourth National Bank for $10,000; discount, $50. (Credit Notes Pay- able, $10,000; Net Cash, $9,950.) J. Received Abraham OHver's note in settlement of bill of nth, $6,250. (Notes Receivable Dr. to Abraham OHver.) J. Received Mark Lane's note for $12,500 in pay- ment of bill of 12th. J. ^ Received Matthew Maine's note for $12,500 in settlement of bill of 12th. 24th. C, NC, D,, GL. Discounted notes of Oliver, Lane and Maine amounting to $31,250; discount, $372.90. (Net Cash, $30,877.10.) P., A., RM. • Purchased of C. WilHams 1,000 tons raw materials, $45,000; 60 day note. J. Gave C. Williams 60 day note, $45,000, in payment of account. S., A., FG. Sold John Ireland 1,000 cases goods, $12,500. S., A., FG. Sold Thomas Fast 500 cases goods, $6,250. 25th. P., A., SE. Received Harry Bennett's bill of $70 for horse- shoeing. PC, T., HW. & H., Paid $60 for horse blankets; $60 for repairs to S., H. & P. boiler; $2.50 for matches. S., A., FG. Sold George Bi^elow 1,000 cases goods,*$i2,5oo. 28th. C, NC, GL. Paid for Labor, $10,500; Superintendent, $250; Office Salaries, $300; Engineers, $150; Stable Expense, $150; A. Arnold, $500. S., A., FG. Sold Seymour Bunce 500 cases goods, $6,250. P. A., S. E. • Received bill of Jansen & Company for care of horses, $250. Add all columns in Petty Cash. Having entered the transactions for the month in the subsidiary books, the student must now post the items to the several accounts in the ledgers as follows: Sales Book. Open accounts in the Customers' Ledger for the thirteen customers and debit their accounts with the amounts purchased; add the two columns (amount and finished goods), and if they are correctly written up will amount to $159,375 each. To the right of the Finished Goods column make the following .„ ^ entry: II Customers' Controlling Account $159,375.00 To Sales $i59,375-oo Sales for the month of February and post this entry in the General Ledger. Purchase Book. Open accounts for twenty credi- tors in the Creditors' Ledger and post the sev- eral amounts to their credit in the Creditors' Ledger, then make the following summary entry at the bottom of the page in the Purchase Book: Sundries. To Sundries. Horses, Wagons and Harness $7,000.00 Advertising 48,070.00 Furniture & Fixtures. 5,000.00 Raw Materials 57,650.00 Packing Materials. .. . 7,850.00 Machinery and Tools 30,810.00 Stable Expense 320.00 Stationery and Print- ing 1,500.00 Heat and Power 1,770.00 To Creditors' Controlling Ac- count $159,970.00 Post th^se amounts in the General Ledger. Cash Book. Debit Side. Post the three items to the credit of the several accounts in the General Ledger, and credit Smith with the $12,500 in the Customers' Ledger. At the bottom of the page make the following entry: Sundries. To Sundries. Cash $102,952.10 Discounts 797-90 To Customers' Controlling Ac- count $12,500.00 General Ledger Account 91,250.00 Post cash discounts and controlling accounts items but do not post the $91,250, as that has been entered in the ledger to the credit of Arnold, Notes Payable and Notes Receivable. Cash Book. Credit Side. Post the several items in the General Ledger column to the debit of the accounts in the General Ledger and likewise 12 charge the creditors with the amounts paid to them as per creditors' column. Make the fol- lowing summary entry: Sundries. To Sundries. Creditors' Control- ling Account $36,950.00 General Ledger (items posted) ... . 35,800.00 To Cash $72,400.00 Discounts 350-oo Post to the above accounts (in the General Ledger) all the items except $35,800, which has already been posted in detail. Petty Cash .Book. Make the following sum- mary entry and post to the accounts in the General Ledger: Sundries. To Sundries. Postage $70.00 Stationery and Printing. . 72.50 Factory Expense ^0.00 Horses, Wagons and Harness 60.00 Sundry Expense 2.50 Heat and Power. ..;.... 60.00 The Petty Cash Account $345.00 Journal. Make and post the following entry: Sundries. To Sundries. General Ledger (posted) $111,250.00 Sundry Creditors' Controlling Ac- count 45,000.00 To General Ledger (posted). . $125,000.00 Customers' Controlling Account 31,250.00 This entry is made up of the $80,000 charged to Real Estate and the $31,250 charged to Bills Receivable in the General Ledger and the $80,000 already posted to the credit of Cap- ital Account and the $31,250, in notes, which has not as yet been posted to the controlling account in the General Ledger, and the $45,000 13 ^ OF tHg UNIVERSITY posted to the debit of C. Williams but not yet posted to Creditors' Controlling Account. TRIAL BALANCE. February. Labor $30,500.00 Superintendence 750.00 Raw Material 57,650.00 Packing Material 7,850.00 Heat and Power 2,280.00 Factory Expense 80.00 Stable Expense 770.00 Postage 70.00 Advertising 48,070.00 Office Salaries. .' 900.00 Stationery and Printing : 1,572.50 Sundry Expense 2.50 Discounts Lost 797-90 Discounts Gained $350.00 Sales 159,375.00 Cash 30,552.10 Petty Cash. i55-oo Customers' Control- ling Account 115,625.00 Real Estate 80,000.00 Horses, Wagons and Harness 7,060.00 Machinery and Tools 30,810.00 Notes Payable 55,000.00 Creditors' Controlling Account 78,020.00 Furniture and Fix- tures 5,000.00 B. Burt, Capital 80,000.00 A. Arnold, Capital 50,000.00 A. Arnold, Draw- ing 2,250.00 $422,745.00 $422,745.00 March i. P., A., RM. Purchased of Frank Mead 1,000 tons raw mate- rial, $40,000. C, NC, GL. Paid freight on goods received from Mead, $520. S., A., FG. Sold Abraham Oliver, 1,000 cases finished goods, $12,500. Paid for postage stamps, $50; stationery and printing, $30; traveling expense of Arnold to Chicago and return, $100. Drew $500 for petty cash. 2nd. Sold Isaac Smith, St. Louis, 1,000 cases finished goods, $12,500. Sold W. Armitage 500 cases finished goods, $6,250. 3rd. Sold Lewis WelHng, Trenton, 1,000 cases finished goods, $12,500. Paid for ink and stationery, $10. Purchased of Howard Company coal, 300 tons, $900. Paid Howard Company coal bills to date, $900. 4th. John Ireland paid his bill Feb. 24th, $12,125; discount, $375. ' Sold John Ireland 1,000 cases finished goods, $12,500. Sold Abraham OHver 500 cases finished goods, $6,250. 5th. Returned to Paul Burt 10. tons raw material, $300. (Make this entry at the bottom of the page.) Paid to Paul Burt bill of 6th ult., $882 ; Discount, $18. Paid for Labor, $11,000; Superintendence, $250; Office Salaries, $300; Engineers, $150; Stable Expense, $150; Arnold, $750.- 7th. C, NC, D., GL. Discounted firm's note, $20,000; discount, $200; net, $19,800. S., A., FG. Sold Frank Patterson 1,000 cases finished goods, $12,500. P., A., S. Purchased new harness of C. Cook, $450. C, NC, GL. Paid bill for cartage of 1,000 tons raw material from pier to store, $750. 8th. S., Cr. A., Dr. W. Armitage returned 100 cases finished goods. Sales. $1,250. (Make this entry at the bottom of the page of the Sales Book) and post in the re- verse of the original entry. C, NC, Cr. L. Paid bill of Lake & Company, $650. 15 PC :.,T. TE. , P., S. & P c. NC ,,GL. s., A., FG. s., A., FG. s., A., FG. PC :.,T. , A., , S. & P. H. &P. c, , NC ., Cr. L. c, , NC ., Cu. L. s., A., FG. s.. A., FG. p. , A., RM. c , NC ., D.,Cr. L. c , NC .,GL. S., A., FG. Sold George Bigelow i,ooo cases finished goods, $12,500. 9th. C, NC, Cr. L. Paid John Horn & Company bill of February 13th, $125. PC, T., P., SE. Paid for postage stamps, $50; paid veterinary surgeon, $30. loth. S., A., FG. Sold Mark Lane 1,000 cases finished goods, $12,500. S., A., FG. Sold Matthew Maine 1,000 cases finished goods, $12,500. nth. P., A., RM. Purchased of Frank Mead 1,000 tons raw material, $35,000. PC, T., H. & P. Paid for oil, $90. P., A., H. & P. Purchased of Howard Coal Company 150 tons coal, $450. C, NC, Cr. L. Paid Johnson & Company bill of February 13th, $1,500. 12th. C, NC, GL. Paid for Labor, $12,100; Drivers (Stable Expense), $150; Engineers, $150; Superintendence, $250; Office Salaries, $300; A. Arnold, $500. 14th. P., A., PM. Purchased of Sommerville Paper Box Company 5,000,000 paper boxes, $25,000; cash, less 5 per cent. P., A., RM. Purchased of Paul Burt 30 tons raw material, $900. P., A., PM. Purchased of L. Sanger packing cases, $5,000. C, NC, Cr. L. Paid Selleck & Company bill of February 14th, $750- 15th. A. Arnold and B. Burt agree to sell, and C Conant agrees to purchase a 15 per cent, interest in the Profits and Losses of the business in consider- ation of the payment of $30,000 by the Vendee to the Vendors. Of this sum Arnold is to re- ceive 60 per cent, and Burt 40 per cent. C Conant, in lieu of capital, is to contribute his skill and labor, which are valuable. At the end of the year, i. e., February ist to Decem- ber 31st, the profits and losses are to be divided between the three partners in the proportion of 50 per cent, to Arnold, 35 per cent, to Burt, and 15 per cent, to Conant, but subject to the former conditions as to interest on capital (6 per cent.) and salary to Arnold of $12,000 16 per annum. Make the entries affecting the accounts of the partners, as follows^ J. C. Conant $30,000 To A. Arnold's Drawing $18,000 B. Burt's " 12,000 A. Arnold and B. Burt have agreed to sell and C. Conant to purchase a 15 per cent, interest in the profits and losses arising from the trans- actions (commencing Feb. ist last) in consideration of Thirty Thou- sand Dollars paid by the Vendee to the Vendors; of this amount A. Arnold is to receive 60 per cent, and B. Burt 40 per cent. The profits and losses are to' be divided in the proportion of 50 per cent, to Arnold and 35 per cent, to Burt, 15 per cent, to C. Conant, but subject to conditions mentioned in the Articles of Co- partnership as to Arnold's salary and the interest on capital. C, NC, GL. Received from C. Conant check for $30,000. S., A., FG. Sold Lewis WeUing 3,000 cases finished goods, $37'5oo- S., A., FG. Sold John Lyon 2,000 cases finished goods, $25,000. P., A., RM. Purchased of C. Williams 3,000 tons raw material, $105,000. J. Gave notes for above account (C. Williams) $15,000, 30 days; $45,000, 60 days; $45,000, 90 days. C, NC, Cu. L. John Lyon paid bill of i6th ult., $6,250. 1 6th. P., A., RM. Purchased of Drake & Company 900 tons raw materials, $27,000. Paid freight on 3,000 tons raw materials, $750. Sold John Bruce 2,000 cases finished goods, $25,000. Sold Y. Valentine 5,000 cases finished goods, $62,500. Received bill of Armstrong & Company for adver- tising, $25,000. Paid Armstrong & Company $50,000 on account. Paid for postage stamps, $100; traveling expenses to Newark and return, $5; entertaining cus- tomers, $10. C, NC, D., GL. Discounted bur note for 60 days, $40,000; Dis- count $400, Net Cash $39,600. , 17 c , NC .,GL s., ,A., FG. s., , A., FG. p. , A., S. c , NC .,Cr. L. PC.,T. , P., TE SE. 1 7th. PC, T., FE. Paid for scrubbing factory, washing windows, etc., $150. P., A., S. & P. Received Nesbitt & Co.'s bill for stationery, $520. i8th. S., A., FG. Sold Ezra Wheeler 4,000 cases finished goods, $50,000. S., A., FG. Sold Mark Lane 4,000 cases finished goods, $50,000. 19th. C, NC, GL. ■ Paid for Labor, $25,500; Stable Expense, $150; Heat and Power, $150; Superintendent, $250; Office Salaries, $300; Arnold, $500; B. Burt, $250. 22nd. C, NC, GL. Paid insurance premium, $1,875. P., A., PM. Purchased of Johnson & Company 2,000 packing cases, $6,600. C, NC, GL. ■ Paid our note due this day, $10,000. 23rd. S., A., FG. Sold Mark Lane 3,000 cases finished goods, $37,500- 25th. S., A., FG. Sold Matthew Maine 4,000 cases finished goods, $50,000. C, NC, D., Cu. L. John Lyon paid his bill of 15th, $24,250; dis- count, $750. C, NC, D., Cu. L. Matthew Maine paid his bill Feb. 21st, $12,375; discount, $125. 28th. C, NC, D., Cu. L. Thomas Fast paid his bill Feb. 24th, $6,125; discount, $125. C, NC, GL. Paid for Labor, $23,000; vSuperintendent, $250; Office Salaries, $300; Heat and Power, $150; Stable Expense, $150; Arnold, $500; Burt, $2,000. P., A., SE. Received Jansen & Co.'s bill for care of horses, $250. Close the books for the month of March by making summary entries and take off a trial balance. TRL\L BALANCE. March. LaV^or $102,100.00 Superintendence.. 1,750.00 Raw Materials.. . 265,250.00 18 Packing Mate- rials $44,450.00 Heat and Power. . 4,320.00 Factory Expense. 230.00 Freight 1,270.00 Cartage 750.00 Insurance 1,875.00 Stable Expense. . . 1,650.00 Postage 270.00 Advertising 73,070.00 Traveling Ex- pense. 105.00 Office Salaries. . . . 2,100.00 Stationery and Printing 2,132.50 Sundry Expense. . 12.50 Discounts Lost. . . 2,772.90 Discounts Gained. $368.00 Saks 608,125.00 Cash 32,405.10 Customers' Con- trolHng Account 501,875.00 Real Estate 80,000.00 Horses, Wagons and Harness . . . 7,510.00 Machinery and Tools..' 30,810.00 Notes Payable. . . . 210,000.00 Creditors' Con- trolling Account 189,965.00 Furniture and Fixtures 5,000.00 . A. Arnold's Cap- ital 50,000.00 B. Burt's Capital. 80,000.00 A. Arnold's Draw- ings 13,500.00 B. Burt's Draw- . ings 9,750.00 $1,161,708.00 $1,161,708.00 Close the nominal accounts into Manufacturing, Trading, and Profit and Loss Accounts, creating Reserves for Bad Debts 3 per cent., and Dis- counts I per cent, on Outstanding Customers' Accounts; Depreciation on Furniture and Fix- tures, 10 per cent. ; Horses, Wagons and Harness, 15 per cent.; Machinery and Tools, 5 per cent.; Tax on Real Estate, 2f per cent, on assessed 19 valuation of $60,000. Inventory of goods on hand, $35,000. Percentages are to be figured on the rate per annum and apportioned according to the period of closing the books . CLOSING ENTRIES. Manufacturing Account $420,964.25 To Raw Materials $265,250.00 Labor 102,100.00 Superintendence. . . . Packing Mate- 1,750.00 rials Heat and Power. . . . 44,450.00 4,320.00 Factory Expense . . . Freight Cartage Insurance 230.00 1,270.00 750.00 312.50 Depreciation Ma- chinery and Tools. Reserve for Taxes. . . 256.75 275.00 To Close. Discounts Gained 368.00 Inventory 35,000.00 Trading Account (cost of manufactured goods) 385,596.25 To Manufac- turing Account To Close. Sales Account 608,125.00 To Trading Account Transfer of Accounts. Discount Lost 5,018.75 To Discount Lost Reserve I per cent, on uncollected accounts Trading Account $222,528.75 To Discounts Lost (on sales) Traveling Expense Advertising Stable Expense Depreciation Horses, Wagons and Harness Profit and Loss Account (bal- ance) 420,964.25 608,125.00 5,018.75 6,768.75 105.00 12,178.33 1,650.00 187.75 201,638.92 20 Profit and Loss $201,638.92 To Office Salaries $2,100.00 Stationery and Printing 2,132.50 Postage 270.00 Discounts Lost (on loans) 1,022.90 Sundry Expense 12.50 Depreciation Furniture and Fixtures 83.33 Reserve for Bad Debts 15,056.25 A. Arnold's Satoy 2,000.00 A. Arnold's Interest '. . 500.00 B. Burt's Interest , 800.00 A. Arnold 50 per cent. Profit. . . 88,830.72 B. Burt 35 per cent. Profit 62,181.50 C. Conant 15 per cent. Profit. . . 26,649.22 The trading account item of trade discounts lost on sales, $6,768.75, is made up of discounts allowed customers, shown in the discount column of the Cash Book, amounting to $1,750, and $5,018.75 reserve for discounts. The discounts on loans are shown in the discount column of the Cash Book. Arnold retires, selling his interest in the business for a bonus of $50,000, in addition to his capital invested. Arnold agrees to take the new firm's note for $50,000, and for his capital he is to receive $25,000 in cash, and the balance when the affairs of the firm are Hquidated. Burt & Conant are to divide in equal shares the balance of cash remaining to the credit of the firm. Burt . & Conant, by mutual consent of all parties in interest, are to take over the Inventory, Horses, Wagons and Harness, Machinery and Tools, Furniture and Fixtures, Real Estate, ^ Advertising Contracts, and unexpired Insurance at their book value less the reserve funds for depreciation, and assume the liabilities for taxes, in consideration of the reserve fund set aside to meet it. They also undertake to col-, lect the book accounts and pay off the liabili- ties of the old firm. In the collection of accounts all were paid without discount with the exception of Ezra Wheeler, who failed, and from whom nothing could be recovered. Loss, $62,500. Clerks' salary and sundry expenses of winding up the business, $5,266.67. 21 o O o O lO lO vO t-» On M C> OS ro m < o H o W W Q ffi ^ c/: ■<1 W e o p^ Z p < m hJ <: Q O o < o O o o o lO Q vo Q On o '6s M 00 u (V m < o O o M d vo ro t~^ ^ CO (N CO .. '^ -^ w I— ( I— I o3 o CM NO O (D CD O ^ §5 < O lo o ^^ O CO O t- O t^ O CO 6 t^ 6 "o 6 CO M 00 M lO O 00 lO M 00 cs o t^ O CO lO 03 ^ CD tn > o '^ >. 03 ^ 4J CD 'ZJ > OJ ^ (D U £p^W 03 03 ^ T^ REALIZATION AND LIQUIDATION ENTRIES. ; Realization and Liqui- dation $722,649.17 • To charge the Reali- zation Account with the assets of the firm, viz: Book Ac- counts, $501,87 5; In- ventory, $35,000; Real Estate,$8o,ooo; Horses, Wagons and Harness, $7,510; Machinery andTools, $30,810; Furniture and Fixtures, $5,000 ; Insurance, $1,562.50; Advertising, $60,- 891.67. To Adjustment Ac- count $722,649.17 Adjustment Account is credited that the contra debit may be made without dis- turbing the accounts representing assets, which remain open upon the books. Adjustment Account. . $420,842.83 Adjustment Account is charged with the total liabilities of the firm to permit the contra entry, to the credit of Reali- zation and Liquida- tion, to be made without disturbing the accounts rep- resenting liabiHties which remain open on the books. To ReaHzation and Liquidation $420,842.83 To credit the above ac- count with the lia- bilities of the firm, viz: Notes Payable, $210,000; Accounts 23 Payable, $189,965; Reserve Tax, $275; Reserve for Bad Debts, $15,056:25; Reserye for Dis- counts, $5,018.75; Depreciation Horses, Wagons and Har- ness, $187.75; Ma- chinery and Tools, $256.75; Furniture and Fixtures, $83.33. Burt & Conant $220,774.17 Pursuant to the terms of the liquidation agreement Burt & Conant purchased of Arnold, Burt & Conant the follow- ing assets: Horses, Wagons and Har- ness, $7,510; Real Estate, $80,000; In- ventory , $35,000; Machinery and Tools, $30,810; Furniture and Fixtures, $5,000; Insurance, $1,562.50; Advertising, $60,- 891.67. To Realization and Liquidation $220,774.17 Credited to this ac- count to record the sale of the above as- sets (which have been charged to this account by a former entry), and showing the full book value to have been real- ized by the sale. J. Realization and Liqui- dation $802.83 Charged to Realiza- tion and Liquidation Account as a contra # charge to the same items credited by a 24 former entry, show- ing the assumption by Burt & Conant of the liability for taxes, $275, and the appropriation b y them of the undivi- ded profits, set aside by Arnold, Burt & Conant as deprecia- tion reserves. To Burt & Conant. . . . $802.83 Under the terms of the sale to Burt & Co- nant of the sundry assets, referred to in the preceding entry, the vendees are en- titled to the undivi- ded profits set aside by the vendors as reserves against depreciation in Horses, Wagons and Harness, $187.75; Machinery and Tools, $256.75; Furniture and Fixtures, $83.33 i Tax HabiHty, $275. Adjustment Account. . $220,774.17 The following assets, having been sold and charged to the ac- count of Burt & Conant, still remain as open accounts on the ledger, and are by this entry transfer- red to Adjustment Account to take them off the books. To Horses, Wagons and Harness. ... $ 7,510.00 Real Estate 80,000.00 Inventory 35,000.00 Machinery and Tools 30,810.00 Furniture and Fixtures 5,000.00 25 J- Insurance Advertising $1,562.50 60,891.67 Sund] ries. To Adjustment Account Reserve for Bad Debts.. 15,056.25 *' Discounts... 5,018.75 " Horses, * Wagons and Har- 20,877.83 <( < < ness 187.75 ' Machinery and Tools. 256.75 ' Furniture and Fix- tures 83.33 * Tax. 275.00 With the exception of Reserve for Bad Debts and Discounts these undivided profits were transferred to Burt & Conant; they are now transferred to the Adjustment Account to close them out. The reserve for bad debts is also transferred as it is carried as a reserve in • the Realization and Liquidation Account where it will serve the purpose for which it was created, viz: as an insurance against possible losses. The student will now arrange the Cash Book headings to facilitate postings as follows: CASH BOOK, DEBIT SIDE. Net Cash. Burt & Conant, Dr. To Realization and Liquidation. Creditors. Adjustment, Dr. To Sundry Customers' Controlling Acc't. CASH BOOK, CREDIT SIDE. Net Cash. Realization and Liquidation Dr. to Burt & Conant. Creditors % S. Cr. C. Dr. To Ad- justment. General Ledger Partners Dr. To Cash. C, GL. only C, GL. Paid A. Arnold, $25,000; B. Burt, $3,702.55; C. Conant, $3,702.55; according to the terms of the liquidation agreement as to the cash bal- ance. Use the general" ledger column only; charge partners and credit cash. Balance of cash brought forward, $32,405.10. 26 C, NC, Cu. The customers pay their accounts as follows: Smith, $25,000; Oliver, $18,750; Lane, $100,000; Maine, $62,500; Patterson, $15,625; Bigelow, $28,125; Welling, $65,625; Bruce, $37,500; Ireland, $12,500; Bunce, $6,250; Armitage, $5,000; Valentine, $62,500. Post the above to the credit of the several cus- tomers' accounts from the Cash Book. The to- taj, $439,375.00, is to be posted in accordance with the altered heading of the columns of the Cash Book. C, NC, Cr. The following creditors of the firm are paid off by Burt & Conant, viz: Bogota Machine Co., $15,160; Office Supply Co., $2,500; Howard Coal Co., $1,350; Sommerville Paper Box Co., $25,000; Burt, $600; Nesbitt, $520; Wal- lace, $6,000; Johnson, $7,500; Armstrong, '■ $23,070; Herzog, $245; Bennett, $70; Mead, $75,000; Cook, $450; Sanger, $5,000; Drake, $27,000; Jansen & Co., $500. Foot the cash col- umns here, $189,965.00. Notes Payable, $210,000. C, NC. only. Sundry Expenses, $5,266.67. Add both cash columns again; total net cash col- umn, $405,-231.67. Creditors' column, $399,965. Post the footings as follows: Charge Realization and Liquidation, $405,231.67. Credit Burt &; Conant. Charge Sundry Creditors' Controlling Ac- count, $189,965.00. Notes Payable, $2 10,000.00. Credit Adjustment Account, $399,965.00. C.,^GL. Credit Burt & Conant, $105,984.88, advances of May 5th, 1907. C, GL. Charge A. Arnold, $105,984.88. Paid as of May 5th. J. A. Arnold Drawing Account $79,830.72 B. Burt Drawing Account. 69,028.95 To A. Arnold Capital Account $79,830.72 B. Burt Capital Account 69,028.95 Transfer of Balances. J. Adjustment Account. .. . $62,500.00 To Sundry Customers' Control- ling Account $62,500.00 Bad debt of Ezra Wheeler. Sundries. A. Arnold 50 per cent, of loss 23,845.84 B. Burt 35 per cent. of loss. 16,692.08 C. Conant 15 per cent, of loss 7.153-75 To Realization and Liquidation. ... 47,691.67 27 Division of loss attending liquidation. Burt & Conant $50,000.00 To A. Arnold $50,000.00 Sale to Burt & Conant of a one-half interest in good will, pursuant to the terms of the liquida- tion agreement. A. Arnold 50,000.00 To Burt & Conant 50,000.00 Note in settlement of good will as per agreement. B. Burt 132,336.87 C. Conant 15,792.92 To Burt & Conant. 148,129.79 Transfer of Accounts. 28 REALIZATION AND LIQUIDATION OF ARNOLD, BURT & CONANT March 28th, 1907. Ledger Account. Book Accounts $501,875.00 Inventory 35,000.00 Real Estate 80,000.00 Horses, Wagons and Harness Machinery and Tools. . Furniture and Fixtures Insurance 7,510.00 30,810.00 5,000.00 1.56.2.50 Advertising 60,891.67 Notes Payable $210,000.00 Accounts Payable.. . . 189,965.00 Reserve for Taxes.. . . 275.00 Bad Debts.. 15,056.25 Discounts. . . 5,018.75 " Depreciation Horses, W. and H. . . . 187.75 ' ' Machinery and Tools. 256.75 " Furniture and Fixtures. . 83.33 Total $722,649.17 Total $420,842.83 Burt & Conant Tax. 275.00 " " " Horses, Wagons and Harness 187.75 Burt & Conant Ma- chinery and Tools.. . 256.75 Burt & Conant Fur- niture and Fixtures. . 83.33 Cash, Creditors Accts. . 399,965.00 Expenses 5,266.67 $1,128,683.67 Burt & Conant In- ventory 35,000.00 Burt & Conant Real Estate 80,000.00 Burt & Conant Horses, Wagons & Harness 7,510.00 Burt & Conant Ma- chinery and Tools. . 30,810.00 Burt & Conant Fur- niture and Fixtures 5,000.00 Burt & Conant In- surance 1,562.50 Burt & Conant Ad- vertising 60,891.67 Cash, Customers. . . • • 439>375-oo Total $1,080,992.00 A. Arnold 50 per cent. of loss 23,845.84 B. Burt 35 per cent, of loss 16,692.08 C. Conant 15 per cent. of loss 7>i53-75 $1,128,683.67 29 PART II Part 2. Burt & Conant. April. * Books to be Opened. General Ledger, Customers' Ledger, Creditors' Ledger, Sales Book, Petty Cash Book, Purchase Book, Cash Book, Journal, Cost Ledger. ACCOUNTS TO BE OPENED IN THE GENERAL LEDGER. FOLIO. FOLIO. I Arnold, Burt & Conant, in Liqui- 8 dation. I A. Arnold. 8 I B. Burt. 1 C. Conant. 2 Real Estate. 2 Machinery and Tools. 2 Horses, Wagons and Harness. 2 Furniture and Fixtures. 3 Goodwill. 3 Notes Receivable. 3 Leasehold Property. 3 Cash. 4 Petty Cash. 4 Missouri Pacific Stock. 4 Raw Material. 4 Coal. 5 Packing Materials. 5 Engine Supphes. 5, Sundry Customers' ControlHng Account. 5 Finished Goods. 6 Notes Discounted. 6 Considerations for Endorsed Notes 6 Loans. 6 Notes Payable. 7 Rates and Taxes. 7 Discounts Gained. 7 Sundry Creditors' Controlling Ac- count. 7 Finished Goods Sales. 8 Depreciation Machinery and Tools. Depreciation Horses, Wagons and Harness. Bad Debts. Depreciation Furniture and Fixtures. Reserve Raw Materials. Cable and Telegrams. Repairs to Machinery. Discounts Lost. Postage. Stationery and Printing. Factory Expense. 10 Sundry Expense. 11 Stable Expense. Office Salaries. Superintendent. Productive Labor. Engineer and Fireman. Advertising. Insurance. Accrued Interest. Missouri Pacific Dividend. Silas Wilcox. Sam Lewis. Specialty Manufacturing Co. Capital Stock, Specialty Co. Debenture Bonds, Specialty Co. Trading. Profit and Loss. II II II 12 12 12 12 13 13 13 13 14 14 32 ACCOUNTS TO BE OPENED IN THE COST LEDGER. Folios I and 2. Columns from left to right. Operating Account. Vouchers, Total, Productive Labor, Unproductive Labor, Factory Ex- pense, Repairs to Machinery, Stores, Coal, Raw Material, Insurance, Depreciation, Rates and Taxes, Discounts Lost, Advertising, Stable Expense, Sundries, Engineer and Fireman, Administration Expense. Folio 3. Stores. Columnar Headings. Vouchers, Total, Packing, Heat and Power, Inventory. Folio 3. Fuel. Vouchers, Total, Consumed. FoHo 4. Raw Materials. Vouchers, Total, Consumed. FoHo 5. Items in Suspense. Vouchers, Total, Labor, Insurance, Factory Expense, Rates and Taxes, Depreciation, Stable Expense. FoHo 6. Heat and Power. Vouchers, Total, Coal, Stores, Repairs, Engineer and Fireman. FoHo 7. Grinding. Vouchers, Total, Labor, Coal, Stores, Repairs, Engineer and Fireman. FoHo 7. Mixing. Vouchers, Total, Labor, Coal, Stores, Repairs, Engineer and Fireman. Folios. Drying. Vouchers, Total, Labor, Coal, Stores, Repairs, Engineer and Fireman. FoHo 8. Packing. Vouchers, Total, Labor, Coal, Stores, Repairs, Engineer and Fireman. FoHo 9. Trading. Vouchers, Total, Advertising, Discount. 33 Folio 9. Administration. Vouchers, Total, Salaries, Postage, Cables, Stationery, Sundries, Depre- ciation, Discounts. Folios 13 and 14. Summary of Finished Goods Cost. (Blank) Total, Labor, Superintendence, Coal, Engineer and Fireman, Depreciation, Stores, Rates and Taxes, Insurance, Stable Expense, Raw Materials, Factory Expense, Repairs. ist. B. Burt and C. Conant commence business with a capital of $225,000, $150,000 of which is con- tributed by Burt and $75,000 by Conant. In- terest to be allowed on the excess and charged on the deficiency of the capital of each partner beyond or under $100,000. Profits and losses to be divided in the ratio of 5 and 4 respec- tively. 2d. C, NC, GL. Burt pays into the firm $25,000. C, NC, GL. Conant pays into the firm $50,000. J. Received from Arnold, Burt & Conant in Liqui- dation the following property: Real Estate, $80,000; Raw Material (Inventory), $35,000; Horses, Wagons and Harness, $7,322.25; Fur- niture and Fixtures,$4, 650; Insurance,$i, 562. 50; Advertising, $60,891.67; Machinery and Tools,' $30,553.25; Reserve for Taxes, $275, for which* . the firm assumes the tax liability. Make the Journal entries as follows: Sundries. To Arnold, Burt & . Conant in Liqui- dation $219,979.67 Representing the value of the as- sets sold by the above mentioned firm to Burt & Conant and to be placed upon the books of the new firm under the following cap- tions: Real Estate , . . $80,000.00 34 Raw Materials (In- ventory) $35,000.00 Horses, Wagons and Harness 7,322,25 Machinery and Tools. . 3o>553-25 Furniture and Fixtures 4,650.00 Insurance 1,562.50 Advertising 60,891.67 Arnold, Burt & Co- nant, in Liquidation 275.00 To Reserve for Rates and Taxes $275.00 Reserve set aside by Arnold, Burt & Conant to meet Rates and Taxes accrued but not due, the liability being assumed by the firm of Burt & Conant. C, NC, GL. Paid on account of the HabiUties of Arnold, Burt & Gonant in Liquidation, $19,010. J. Gave firm's note to A. Arnold for $50,000, as per terms of Liquidation agreement, Journal entry "as follows: Good Will $50,000.00 To A. Arnold $50,000.00 Paid Arnold for his interest in the good will of the firm as set forth in the Liquidation agreement. A. Arnold $50,000.00 To Notes Payable $50,000.00 Note given in payment of good will. 3rd. P., A., M. & T. Purchased of the Bogota Machine Company addi- tional machinery for $6,000. P., A., S. Purchased of the Office Supply Company furniture and fixtures, $1,000. 4th. P., A., C. Purchased of the Howard Coal Company 30 tons of coal, $90; Voucher No. 3. Also enter this voucher in the Cost Ledger, first in the Oper- ating Account, under the Total column, and Coal. Again in the Coal Fuel Account under Total. P., A., ES. Purchased of B. Jones oil and waste, $10; Voucher No. 4. Post into the Cost Ledger in Operating Account under columns for Total and Stores, and again in Stores Account under Total column only. 35 5th. C, NC, GL. Purchased lease having one year to run with privi- lege of renewal for ten years and paid $3,600 cash for it. P., A., RM. Purchased of C. WilHams 20 tons of raw material, $1,000; Voucher No. 5. Also post this item into the Cost Ledger, first in the Operating Ac- count under Total and Raw Materials, and again in Raw Material Account in Total column only. P., A., PM. Purchased of L. Mead 1,000 lbs. packing paper, $30; Voucher No. 6. (Also post into Cost Ledger under the same accounts and columns as Voucher No. 4.) P., A., PM. Purchased of Sommerville Paper Box Co. 225,000 boxes, $1,000; Voucher No. 7. (Post again in Cost Ledger under the same accounts as Voucher No. 6.) P., A., RM. Purchased of Paul Burt 3 tons of raw material, $180; Voucher No. 8. (Post in Cost Ledger as per Voucher No. 5.) 6th. C, NC, GL. Paid Engineer and Fireman, Voucher No. 9, $30. (Cost Ledger, Operating Account, Total and Engineer and Fireman; again in Heat and Power Account, Total and Labor columns.) C, NC, GL. • Paid Factory Hands, Voucher No. 10, $50. (Cost Ledger, Operating Account, Total and Labor; Grinding, Total and Labor, $12.50; Mixing, Total and Labor, $12.50; Drying, Total and Labor, $12.50; Packing, Total and Labor, $12.50.) C, NC, GL. Paid B. Burt, $100. 9th. C, NC, GL. Paid on account of liabilities of Arnold, Burt & Conant in Liquidation, $39,620. P., A., S. Purchased of Tattersall & Company, horse, wagon and harness, $1,400. C, NC, GL. Paid on account Arnold, Burt & Conant in Liqui- dation, $98,835. P., A., PM. Purchased of Silas Herring 200 packing cases, $60; Voucher No. 11. (Cost Ledger, Oper- ating Account, Total Stores, Stores Account, Total only.) S., A., FGS. Sold Isaac Smith 200 cases finished goods, $2,500. S., A., FGS. Sold A. Oliver 100 cases finished goods, $1,250. C, NC, GL. . Received on account Arnold, Burt & Conant in Liquidation, $439,375. 36 UNIVERSITY ^^ OF £^iF03m ^ nth. C, NC, GL. Purchased 400 shares Missouri Pacific stock at 102, $40,800. C, NC, GL. Borrowed on our note at 3% $20,000, pledging 300 shares Missouri Pacific stock as security. Mercantile Trust Company. (Credit Loan Account.) 12th. C, NC, GL. Paid on account of Arnold, Burt & Conant in Liquidation, Clerks and General Expenses, $5,000. C, NC, GL.' Paid on account of Arnold, Burt & Conant in Liquidation, $242,500. P., A., S. & P. Received bill of Geo. F. Nesbitt & Co. for sta- tionery, $300. P., A., RM. Purchased of Gus Wallace & Co. 20 tons raw material, $1,200; Voucher No. 12. (Cost Ledger, Operating Account, Total and Raw Material; Raw Material Account, Total only.) P.,' A., M. & T. Purchasedof Bogota Machine Co., machinery, $130. P., AS. Received of John Horn bill for repairs to ma- chiilery, $25; Voucher No. 13. (Cost Ledger, Operating Account, Total Repairs to Machin- ery. Heat and Power Account, Total and Repairs, $10; Drying Account, Total and Repairs, $15.) S., A., FG. . Sold George Bigelow 50 cases finished goods, $625. P. C, T., P. Paid for postage stamps, $6. P., A., PM. Purchased of Johnson & Co. 1,000 packing cases, $300; Voucher No. 14. (Cost Ledger, Operating Account, Total, Stores; Stores Account, Total only.) P. C, T., FE. Paid for brooms, soap, towels, for factory use, $10; Voucher No. 14 A. (Cost Ledger, Operating Account, Total and Factory Expense. "Items in Suspense" Account, Total and Factory Expense.) C, NC, GL. Charge Petty Cash Account with $60. This sum is to remain charged on the ledger as "impressed cash." As it is disbursed the petty cashier surrenders his vouchers, which are charged off in the General Cash Book to the debit of the several accounts and their total sum in cash is paid to the petty cashier, who then has the original sum, $60, in his possession. S., A., FG. Sold Frank Patterson 50 cases finished goods, $625. 13th. No entry. • Endorsed notes for Silas Wilcox for $20,000 in consideration of 1%. 37 C, NC, GL. Received check from Silas Wilcox, $200. P., A., RM. Purchased of Selleck & Co. 6 tons raw material, $150; Voucher No. 15. (Cost Ledger, Operatingf Account, Total and Raw Material. Also Raw Material Accounts, Total only.) C, NC, Cred. Paid Howard Coal Co., $90. • C, NC, D., Cr. Paid C Williams, $490; discount, $10. C, NC, D., Cr. Paid Sommerville Paper Box Co., $950; discount, $50- C, NC, GL. Paid Wages, Voucher No. 16, $1,900. (Cost Ledger, Operating Account, Total Labor; also Grinding, Total and Labor, $68.75; Mixing, Total and Labor, $40.63; Drying, Total and Labor, $40.63; Packing, Total and Labor, $1,749.99.) C, NC, GL. Paid Superintendent, Voucher No. 17, $150. (Cost Ledger, Operating Account, Total, Unpro- ductive Labor; also ''Items in Suspense," Total Labor.) C, NC, GL. Paid Drivers, Voucher No. 18, $30. (Cost Ledger, Operating Account, Total, Stable Expense; "Items in Suspense," Total, Stable Expense.) C, NC, GL. Paid Engineer and Fireman, Voucher No. 19, $30. (Cost Ledger, Operating Account, Total, En- gineer and Fireman; Heat and Power, Total and Labor.) C, NC, GL. Paid Office Salaries, Voucher No. 20, $60. (Cost Ledger, Operating Account, Total Adminis- tration Expense; Administration Account, Total Salaries.) C, NC, GL. B. Burt drew $100. P. C, T., P., S. & P. Paid for pens, $1.50; postage, $4. P., A., S. Received bill of Armstrong & Co., for advertising, $1,014. No entry. Endorsed note of Silas Wilcox, $70,000. C, NC, GL. Received check for $700 from Wilcox. C, NC, GL, Borrowed on note at the Western National Bank, $12,000, pledging 100 shares Missouri Pacific stock as security in part. i6th. P., A., C Purchased of the Howard Coal Co. 150 tons coal, $450, Voucher No. 21. (Post in Cost Ledger as before.) S., A., FG. • Sold Lewis Welling, Trenton, N. J., 50 cases finished goods, $625. S., A., FG. Sold John Lyon, Buffalo, N. Y., 100 cases finished goods, $1,250. C, NC, Cr. Paid Geo. F.' Nesbitt & Co., bill of 12th inst., $300. 38 1 7th. S., A., FG. Sold James Bruce loo cases finished goods, $2,500. P., A., S. Received Armstrong & Co.'s bill for advertising, $600. P. C, T., P., SP. Paid for postage stamps, $4; stationery, $8. P., A., S. Received L. Herzog's bill for repairs to machinery $49; Voucher No. 22. (Cost Ledger, Operating Account; also Grinding Account, $29, Total and Repairs; Mixing, $20, Total and Repairs.) P. C, T., FE. Paid for washing factory windows, $6; Voucher No. 23. (Cost Ledger, Operating Account, Total Factory Expense; "Items in Suspense," Total and Factory Expense.) C, NC, Cr. Paid Bogota Machine Co., $3,000 on account. C, NC, Cr. Paid Office Supply Co., $500. S., A., FG. Sold Ezra Wheeler 200 cases finished goods, $2,500. 19th. C, NC, Cr. Paid bill of Tattersall & Co., $1,400. S., A., FG. Sold Lewis WeUing 200 cases finished goods, $2,500. P., A., M. & T. Purchased of Bogota Machine Co., extra knives, . S32. 2oth. C, NC, Cr. Paid bill of B. Jones, $10, and bill of L. Mead, $30. S., A., FG. Sold Isaac Smith 200 cases finished goods, $2,500. C, NC, D., Cu. . Received check of Isaac Smith for bill of loth, $2,425; discount, $75. C, NC, GL. Paid Voucher No. 24, $2,050, for Wages. (Cost Ledger, Operating Account, Total, Labor; Grinding Account, Total, Productive Labor, $40.62 ; Mixing, Total, Productive Labor, $40.62 ; Drying, Total, Productive Labor, $40.62; Pack- ing, Total, Productive Labor, $1,928.14.) C, NC, GL. Paid Voucher No. 25, Superintendent, $150. (Cost Ledger, post as before.) C, NC, GL. Paid office salaries, Voucher No. 26, $60. (Post in Cost Ledger, as before.) . C, NC, GL. Paid Engineer and Fireman, Voucher No. 27, $30. (Cost Ledger, post as previous item of same character. ) C, NC, GL. Paid Drivers, Voucher No. 28, $30. (Cost Ledger, post as before.) C.,NC,GL. B.Burt, $150. C, NC, Cr. Paid Silas Herring's bill of loth, $60. S., A., FG. Sold Matthew Maine 200 cases finished goods, $2,500. P^, A., C. Purchased of the Howard Coal Co., 150 tons coal, $450. (Post in the Cost Ledger as before, Voucher No. 29.) P., A., PM. Purchased of Johnson & Co. 1,000 packing cases, $180; Voucher No. 30. (Cost Ledger, post as before.) C, NC, D., GL. Discount firm's note at Fourth National Bank for $2,000; discount, $10. J.. Received Abraham Oliver's note in settlement of bill of nth, $1,250; Jas. Bruce's note, $2,500; Matthew Maine's note, $2,500. Journal entry as follows: Notes Receivable .. $6,250.00 To Abraham OHver $1,250.00 James Bruce 2,500.00 Matthew Maine 2,500.00 Notes Received. 24th. C, NC, D., GL. Discounted notes of Oliver, Bruce & Maine, amounting to $6,250; discount, $74.58. Credit Notes Discounted Account with $6,250. When the notes are paid by the makers, Notes Discounted is debited and Notes Receivable credited. This enables the accountant to ascer- tain the contingent liability on outstanding notes endorsed by the firm. P., A., RM. Purchased of C. Williams 100 tons raw material, $9,000, 60 day note; Voucher No. 31. (Cost Ledger, post as before.) J. Gave C. Williams 60 day note for $9,000, in settle- ment of account. S., A., FG. Sold John Ireland 200 cases finished goods, 60 days, $2,500. S., A., FG. Sold Thomas Fast 100 cases finished goods, $1,250. 25th. P., A., SE. Received Harry Bennett's bill of $14 for horse shoeing; Voucher No. 32. (Cost Ledger, Oper- ating Account, Total, Stable Expense; ''Items in Suspense," Total, Stable Expense.) P. C, HW. & H. Paid $12.00 for horse blankets. P. C, S., C. Paid .50 for matches; cable $4. S., A., FGS. Sold Geo. Bigelow 200 cases finished goods, $2,500. . 27th. C. NC, GL. ' Paid Wages Voucher No. 33, $2,100. (Cost Ac- count Ledger, Operating, Total, Labor ; Grinding, Total, Labor, $40.63; Mixing, $68.75; Drying, ,75; Packing, $1,921.87.) Office Salaries, 40 Voucher 34, $60. Engineer and fireman^ Voucher No. 35, $30; Drivers, Voucher No. 36,. $30. C. Conant, $100. Superintendent, $150. Voucher No. 37. 31st. S. A., F. G. S. Sold Se3^mour Bunce 100 cases finished goods^ . $1,250. P. A., S. E. Received bill of Jansen & Co. for care of horse, $50; Voucher No. 38. (Cost Ledger, Operating Account, Total, Stable Expense; "Items in Suspense," Total and Stable Expense.) C, N. C, G. L. Drew check for $56 for petty cash disbursements. Transfer petty cash footings to Cash Book. Make summary entries of totals in Cash Book,. Invoice Book, and Sales Book or post direct from the footings of the columns; prove the Ledger postings by taking off a trial balance. SUMMARY OF BOOKS OF ORIGINAL ENTRY. Purchase Book Pages 2 and 3. Sundries. To Sundry Creditors' Controlling Account $24,7 14.0a Stationery and Printing $300.00 Office Furniture and Fixtures 1,000.00 Horses, Wagons and Harness 1,400.00 Repairs to Machinery 74.00 Advertising 1,614.00 Raw Materials 11,530.00 Machinery and Tools '. . 6,162.00 Stable Expense 64.00 Coal 990.00 Engine Supplies. '. 10.00 Packing Materials 1,570.00 Sales Book. Sundry Customers' Controlling Account $26,875.00 To Finished Goods Sales $26,875.00 Cash Book. Page 3. Cash $557,865.42 Discounts Lost i59-58 Sundry Customers' ControlHng Ac- count $2,500.00 General Ledger (Posted) 555,525.0a Cash Book. Page 4. Sundry Creditors' ControlHng Account $6,890.00 4J General Ledger (Posted) .' $456,871.00 To Cash $463,701.00 Discounts gained 60.00 Journal. Bills Receivable (Posted) $6,250.00 To Sundry Customers' Controlling Account $6,250.00 Sundry Creditors' Controlling Account 9,000.00 To General Ledger (Posted) 9,000.00 Arnold, Burt & Conant, in Liquidation 254,114.67 To B. Burt 132,336.87 C. Conant 15,792.92 A. Arnold 105,984.88 Distribution of Capital of the firm of Arnold, Burt & Conant as shown by the books of A., B. and C. TRIAL BALANCE. No. I. A. Arnold $105,984.88 B. Burt 156,986.87 C. Conant ) 65,692.92 Real Estate $80,000.00 Horses, Wagons and Harness 8,734.25 Machinery and Tools 36,715.25 Furniture and Fixtures 5,650.00 Good Will 50,000.00 Notes Receivable * 6,250.00 Leasehold Property 3,600.00 Cash 94,164.42 Petty Cash 60.00 Missouri Pacific Stock 40,800.00 Raw Material 46,530.00 Coal 990.00 Engine Supplies 10.00 Packing Materials 1,570.00 Customers' Controlling Account 18,125.00 Notes Discounted 6,250.00 Consideration Endorsing Notes 900.00 Loans 32,000.00 Notes Payable 61,000.00 Rates and Taxes 275.00 Discounts Gained 60.00 Creditors' Controlling Account 8,824.00 Finished Goods Sales 26,875.00 Repairs to Machinery 74.00 Discounts Lost 159-58 Postage 14.00 42 Cable •> $4.00 Stationery and Printing 309- 50 Factory Expense 16.00 Sundry Expense .50 Stable Expense i54-oo Office Salaries 180.00 Superintendent. . 450-oo Labor 6,100.00 Engineer and Fireman 120.00 Advertising 62,505.67 Insurance 1,562.50 $464,848.67 $464,848.67 Close the books, allowing for depreciation as follows: Machinery and Tools, ij% on original cost, monthly, $489.54; Horses, Wagons and Harness, i|% on the sinking fund plan; Furniture and Fixtures, 01.61% monthly on the declining balance, $90.97 ; Leasehold Property (credit for amortization, $309.84); debit Leasehold and credit Profit and Loss with $18 interest. These methods are explained on the last pages of this book. Reserve for rates and taxes, $137.50; reserve 1% for discounts; 1% for bad debts. Advertising contracts to run one year from April ist. Raw material can be purchased at 10% less than it cost the firm. The real estate has increased 25% in value. Accrued interest on loans, $50.33. A dividend of 2|% has been declared on Missouri Pacific Stock. In- surance for the month, $130.20. Charge off one-twelfth of the value of good will to Profit and Loss. Voucher No. 39. Depreciation. * Machinery and Tools $489.54 Horses, Wagons and Harness 235.19 Leasehold Property 309.84 11,034.57 Enter in Cost Ledger, Operating Account, Total and Depreciation; also "Items in Suspense," Total and Depreciation. Voucher No. 40. Storekeepers' Report. Cost of 205,000 boxes; 805 lbs. paper; 2,050 packing cases $1,448.27 Oil and waste consumed 5.00 Cost Ledger, enter in Stores Account, under Packing, $1,448.27; Heat and Power, $5. Also allocate the items in Packing and Heat and Power Accounts. Voucher No. 41. Administration Expenses. Postage, $14; Cables, $4; Stationery, $309.50; Sundry Expense, $.50; Discounts Lost, $84.58 (on loans); Depreciation Furniture, $90.97; 43 Cost Ledger, Operating Account (Total and Administration, $328; Discounts Lost, $84.58; Depreciation, $90.97); again in Adminis- tration Total, Postage, Cables, Stationery, Sundries, Discount Lost, Depreciation. Trading Expense. Advertising, $5,208.80; Discounts Lost (Trade Discounts), $256.25. Items in Suspense. Insurance, $130.20; Rates and Taxes, $137.50. Enter these items in Operating Account and again under the above headings. Raw Material. Raw Material, converted into finished goods, $5,120.66. This item is entered under the Consumed column in the Raw Material Account and later carried into the cost sheet of finished goods. Coal. Coal consumed, $690. Enter in Coal Account under Consumed column and again in Heat and Power iVccount, Total and Coal. Heat and Power Distribution. This account will be divided between departments according to the horse- power consumed, but in this case it is arbitrarily distributed, as follows: 50% to Grinding, 30% to Mixing, 15% to Drying, 5% to Packing. Transfer to Grinding, $412.50; Mixing, $247.50; Drying, $123.75; Packing, $41.25. Total, $825. Make up the Cost Summary of Finished Goods, Pages 13 and 14. It will first be necessary to balance the Cost Ledger by ascertaining the sum of the total columns in all the accounts as follows: • Balance of Stores on Hand •. . . . $126.73 " " Fuel. 300.00 Raw Material 11,530.00 Items in Suspense 1,922.27 Grinding 604.00 Mixing 430.00 Drying 301.25 Packing 7,102.02 Trading 5^465.05 Administration 683.55 Total Column of Operating Account. . $28,464.87 In the first column to the left, on folios 13 and 14 of the Cost Ledger, write the captions of the departments, using the first six lines as follows: Raw Materials, Establishment Charges, Grinding, Mixing, Drying, Packing. In the Total column opposite Raw Materials, post the raw material consumed, $5,120.66, and again in the Raw Material column. Transfer the totals of Grinding Account to the Summary Sheet, under appropriate columnar headings, viz: Total, $604 — Productive Labor, $162.50; Repairs, $29; Heat and Power, $412.50; and transfer the 44 totals of the following accounts in the same manner: Mixing, Drying, Packing, Establishment Charges (Items in Suspense). Foot these totals and skipping three or four lines enter Trading, Administration and Inventory. The Inventory is made up of Stores, Fuel and Raw Material, $6,836.07. The total footings should correspond with the Operating Account, $28,464.87. By using the 2,500 cases of goods manufactured as a divisor for each item entered on the sheet it will give the proportion of cost per item in each department, and the cost per case will be shown in the sum of the percentages in the Total column. From the Cost Ledger make the following Journal entry: Finished Goods $15,480.20 To Leasehold Property * $309.84 Depreciation Machinery and Tools 489.54 Depreciation Horses, Wagons and Har- ness 235.19 Coal 690.00 Packing Material 1,448.27 Engine Supplies 5.00 Insurance ■ 130.20 Superintendence 450.00 Labor 6,100.00 Engineer and Fireman 120.00 Rates and Taxes - i37-5o Stable Expense 154.00 Raw ysLter'ml 5,120.66 Factory Expense 16.00 Repairs to Machinery 74.00 Cost of 2,500 cases of goods. Discounts Lost (Old Account) 181.25 To Discounts (New Account) 181.25 1% on outstanding accounts. Trading Account 12,950.01 To Finished Goods 12,693.76 2,050 cases at cost, $6.19208 per case. Trade Discounts Lost 256.25 Finished Goods Sales 26,875.00 Discounts Gained 60.00 To Trading Account 26,935.00 Leasehold Property 18.00 Missouri Pacific Dividend 1,000.00 Consideration Endorsing Notes 900.00 To Profit and Loss 1,918.00 Profit and Loss 10,931.52 To Discounts Lost 84.58 Bad Debts Reserve 181.25 Reserves Raw Materials 640.93 • Accrued Interest 50.33 45 Goodwill Sundry Expense Postage Cable Stationery and Printing Office Salaries Advertising Depreciation Furniture and Fixtures Profit and Loss To B. Burt Interest on Capital $157,336 at 6% Interest on Drawings : . . . . $4 $786.68 1. 00 $785.68 Deduct interest on $100,000 as per agreement 500.00 500.00 328.96 $285.68 C. Conant To Profit and Loss. Interest on $100,000 as per co- partnership agreement Deduct interest on Capital Profit and Loss To B. Burt 5-9 of net profit $4,856.83 C. Conant 4-9 of net profit $4,856.83 TRIAL BALANCE No. Arnold, Burt & Conant in Liquidation B. Burt " C. Conant. Real Estate Machinery and Tools Horses, Wagons and Harness Furniture and Fixtures Goodwill Notes Receivable Leasehold Cash Petty Cash Missouri Pacific Stock Raw Materials Coal Packing Material Engine Supplies Sundry Customers Finished Goods Advertising. $285.68 166.66 •50 14.00 4.00 309-50 180.00 ,208.80 90.97 285.68 171.04 4,856.83 171.04 2,698.24 2,158.59 I ^ $105,984.88 159,970.79 . 67,680.47 ^80,000.00 36,715.25 8,734.25 5,650.00 45,833.34 6,250.00 3,308.16 94,164.42 60.00 40,800.00 41,409.34 300.00 121.73 5.00 18,125.00 2,786.44 57,296.87 * 46 Insurance $1,432.30 Dividend 1,000.00 Notes Discounted $6,250.00 Loans 32,000.00 Notes Payable 61,000.00 Rates and Taxes 412.50 Sundry Creditors 8,824.00 Depreciation Machinery and Tools 489.54 Depreciation Horses, Wagons and Harness. . 235.19 Reserve for Bad Debts 181.25 Depreciation Furniture and Fixtures 90- 9 7 Reserve for Raw Material. 640.93 Accrued Interest 50-33 Discount Lost Reserve 181.25 $443,992.10 $443,992.10 Silas Wilcox fails to meet his notes and Burt & Conant call a meeting of their creditors. Prepare a statement of affairs on the following basis: Customers' accounts, $5,500, is uncollectable ; $7,300 doubtful, but expected to realize $3,300; the balance is good; Missouri Pacific stock is quoted at 96; Leasehold interest can be sold for $1,200; Horses, Wagons and Harness, $1,200; Real Estate, $100,000; Inven- tory, $20,000; Machinery and Tools, $5,000; Furniture and Fixtures, $200; Wages accrued, $500; Taxes, $412.50; Discounted note of Mark ' Lane not expected to be paid, $2,500. With this statement and your knowledge of the affairs of the firm, make up the statement. The insurance premium rebate and the advertising contracts would be an asset to the extent of the amount refunded, which the student may treat as he feels disposed. 47 STATEMENT OF THE AF: April LIABILITIES. Creditors fully secured: Mercantile Trust Co. loan $20,000.00 Accrued interest 34-33 20,034.33 Value of securities held as collateral, 300 shares Mo. Pac. stock at 96 28,800.00 Per contra 8,765.67 Creditors partly secured: Western National Bank loan 12,000.00 Accrued interest 16.00 12,016.00 Deduct value of securities held as security, 100 shares Mo. Pac. stock at 96 9,600.00 $2, 416. CO Creditors unsecured: Notes payable 61,000.00 Sundry Trade creditors 8,824.00 A. Arnold 105,984.88 175,808.88 Sundry Preferred Claims: Rates and Taxes 412.50 Wages ' 500.00 Deducted per contra 912.50 178,224.88 Contingent Liabilities: Liability on endorsement of Mark Lane. . . 2,500.00 Silas Wilcox 90,450.00 92,950.00 271,174.88 48 [RS OF BURT & CONANT. H, 1902. ASSETS. NOMINAL EXPECTED VALUE. TO REALIZE. $60.00 94,164.42 $94,224.42 80,000.00 100,000.00 Cash: In hand. . In bank. . Real Estate. Customers' Accounts: Bad $5,500.00 Doubtful 7,300.00 Good 5,325.00 18,125.00 8,625.00 Dividend Mo. Pac. Stock 1,000.00 1,000.00 Leasehold 3,308.16 1,200.00 Machinery and Tools 36,715.25 5,000.00 Furniture and Fixtures 5,650.00 200.00 Horses, Wagons and Harness. . . 8,734.25 1,200.00 Inventory 44,622.51 20,000.00 Eqtiity in Securities pledged per contra 38,400.00 8,765.67 Deduct Preferred Claims: Taxes Labor 240,215.09 412.50 500.00 912.50 239^302.59 Deficit 31,872.29 271,174.88 40 t^ rt- t^ w CO oo O fO vO C<1 ro CO On ro OS OO M rt O »^ t^ h" 00 Tj- lo 00 On 00 4^ < o o <^ PQ O O O o < I— I o Q *a o CD +-> CO > Is 8 '§ 'S .a n .2 ^ q; ^ o Q K^ u si o I CD O d) S g g U CD • h:^ K^' Q P 03 03 00 o 6 CDN M O CO c^ oo to o w c3 >% o a .,-H ,o3 o tC CD ^ Q SO ,—1 ^ •-^ CD '^j 03 o3 u Silas Wilcox deeds Factory Real Estate to the firm in consideration of Burt & Conant's agreement to deliver to him the two outstanding notes. Sam Lewis, the holder of the notes, agrees to surrender the notes for their face value and interest ($90,450) in bonds of the cor- poration about to be formed. Burt & Conant sell to the Specialty Manufacturing Company all their assets consisting of customers' and corporation book accounts, adver- tising contracts, cash, Missouri Pacific stock, leasehold interest (at its book value), horses, wagons and harness, real estate, inventory, machinery and tools, furniture and fixtures, and insurance policies, in consideration of $300,000 of capital stock and $100,000 of the De- benture Bonds of the Specialty Manufacturing Company. The Company assumes, in addition, all the HabiHties of Burt & Conant, with the exception of the account of S. Lewis, who is to receive Deben- ture Bonds in payment of his claim. Make the necessary entries to close the books and wind up the business. Real Estate $90,450.00 To Silas Wilcox $90,450.00 Pursuant to an agreement, etc., etc. Silas Wilcox 90,450.00 To Sam Lewis 90,450.00 Notes received from Lewis and delivered to Wilcox. Sundries: To Specialty Manufacturing Co.- $208,271.71 Arnold, Burt & Conant, iti Liquidation $105,984.88 Loans 32 ,000.00 Notes Payable 6i,*ooo.oo Rates and Taxes 412.50 Creditors' Book Accounts 8,824.00 Accrued Interest 50-33 Liabilities assumed by the Specialty Manu- facturing Co., according to the agreement, • etc., etc. Specialty Manufacturing Co $514,047.29 To Real Estate $170,450.00 Horses, Wagons and Harness 8,734.25 Machinery and Tools 36,715.25 Furniture and Fixtures • 5,650.00 Lease 3,308.16 Missouri Pacific Stock 40,800.00 Raw Materials. .' . . . 41,409.34 Finished Goods 2,786.44 Coal 300.00 Packing Material 121.73 Engine Supplies 5.00 Customers' Accounts 18,125.00 Advertising • 57,296.87 ST Insurance $1,432.30 Missouri Pacific Dividend . 1,000.00 Good Will 125^912.95 Assets taken over by the Specialty Co. C, N. C, G. L. Paid to Specialty Manufacturing Co. balance of cash on hand, amounting to. . . $94,224.42 Sundries : To Profit and Loss $81,898.74 Depreciation Machinery and Tools $489.54 Horses, Wagons and Harness. . 235.19 Bad Debts 181.25 Furniture and Fixtures 90-97 Reserve for Raw Materials. . . 640.93 Discounts Lost 181.25 Good Will 80,079.61 Specialty Manufacturing Co. stock 300,000.00 Specialty Manufacturing Co. bonds 100,000.00 To Specialty Manufacturing Co $400,000.00 Stocks and bonds received in payment of assets. Sam Lewis $90,450.00 To Debenture Bond Account $90,450.00 Bonds turned over to close his account. Profit and Loss Account $81,898.74 To B. Burt • $45,499.30 C. Conant 36,399.44 B. Burt $205,470.09 To Specialty Manufacturing Co. stock. . . . $195,920.09 Specialty Manufacturing Co. bonds. . . . 9,550.00 Stocks and bonds turned over to Burt as his interest in capital. C. Conant $104,079.91 To Specialty Manufacturing Co. stock. ... $104,079.91 Stock turned over to Conant in payment of his capital interest. Depreciation. Written off at a fixed rate per cent, on a declining balance. The formula for determining the rate per cent, to be written off on a declining balance is given by Mr. George Lisle as follows: Depreciation of Furniture and Fixtures. Let V represent value of investments $5,650.00 R Residual value 4,650.00 N Number of terms 12 52 (V)- Log. or I — (4650) I (565°) 12 I 12 (3,667,453 (R),^ (V)" = 9839 (V)" = d = .( 01.61% nearly. 3,753,048) 1.992950 OI6I LEASEHOLD PROPERTY DEPRECIATION. The principal, $3,600, at compound interest for twelve periods (at 1.005 per month) at 6% per annum will amount to $3,822.04. The annuity of $1 for twelve periods at the same rate and time equals $12.3356. Dividing the principal, $3,822.04 by the annuity of one dollar $12.3356 equals $309.84, to be written off monthly and charged to Profit and Loss ; and six per cent, on the principal is charged to the lease account and credited to Profit and Loss. LEASE. Principal $3,600.00 | First | By Profit and Loss Interest 6% (Profit and Loss) $3,618.00 ( By Profit and Loss.. $309.84 Interest 6% 18.00 f Month | Balance down 3,308.16 $3,618.00 Balance $3,308.16 ) Second j Profit and Loss $309.84 Interest 6% 16.54 f Month 1 Balance down 3,014.86 (Profit and Loss) $3,324-70 Balance, Interest. $3,324.70 $308.30 I Twelfth f -n ^ , -, T 1.54 I Month I Profit and Loss. $309.84 $309.84 $309.84 SINKING FUND METHOD OF DEPRECIATION. On theory to set aside each year such a sum as to accumulate at com- pound interest at a given rate, will amount to the original investment. The amount of one dollar per month or an annuity of one dollar per S3 month, invested at the end of the first month, at compound interest at the rate of ii% per month, in twenty-four months will amount to $28.633445-. Dividing the investment, $6,734.25, by the annuity, $28.633445 gives the amount to be invested, i. e., $235.19. To this must be added the interest on the principal at i>^% per month, that is to say, $235.19 + i^% = $238.72 for the second month; $242.30 for the third month, and so on until the annuity and accumulations amount to $6,734.25, which they will do in two years. Horses, Wagons and Harness. ^""'^'P"^ ^'•^''■'' Sh } By Profit and Loss.. $.^5.^9 Second ) ,, ,, << << o ^ Month f '^^-7' Third ) .. .. .< Month I ^42.30 Twenty- ) fourth [ " " " " 331.19 Balance of Ac- Month ) count..:,... $2,331.19 Residual balance. .. . $2,000.00 Balance $2,000.00 The method frequently adopted for depreciating the value of an account is to write off a fixed rate per cent, on the original investment, as for instance: Value of Machinery and Tools $36,715.25 Residual value 20% 7)343-05 Depreciation to be written off being 80% in 60 terms $29,372.20 80 60 = ^-333333% iK% of $36,7 15.25 =$489.54 to be written off monthly. This method required a much smaller amount to be charged off in the beginning than by the percentage on a declining balance method. 54 PART III Part 3. Specialty Manufacturing Co. Books to be Opened. Ledger, Audited Voucher Record, Cash Book, Journal, Cost Ledger Accounts to be Opened. General Ledger. Plant and Sundry Assets, Burt & Conant, A. Arnold, Loans, Notes Payable, Rates and Taxes, Sundry Creditors, Capital Stock, DelDenture Bonds, Charles Adams, George Wallace, Thomas Hunt, Real Estate, Horses, Wagons and Harness, Machinery and Tools, Furniture and Fixtures, Leasehold Property, Missouri Pacific Stock, Customers' Book Accounts, Advertising, Insurance, Missouri Pacific Dividend, Good Will, Office Pay Roll, Officers' Salaries, Cost Account, Cash, Audited Vouchers, Stationery and Printing, Reserve for Taxes, Re- serve for Depreciation Machinery and Tools, Reserve for Depreciation Horse, Wagon and Harness, Contract Account, Joe Sam Brown, Pine, Twig & Co., Hardwood & Company, Smith, Curtis & Co., White- house & Company. Cost Ledger. Folios I and 2. Operating Account. Columnar Headings. Vouchers, Total, Labor, Superintendent, Stable Expense, Raw Mate- rials, Maintenance and Repair, Stores, Fuel, Factory Expense, Rates and Taxes, Depreciation, Insurance, Advertising, Sundries. Folio 3. Raw Materials. Vouchers, Total, Consumed. Stores. Vouchers, Total, Consumed. FoHo 4. Fuel. Vouchers, Total, Consumed. Folio 5. Heat and Power. Vouchers, Total, Fuel, Labor, Repairs. 57 Folio 6. Establishment Charges. Vouchers, Total, Superintendent, Stable Expense, Factory Expense, Insurance, Advertising, Depreciation, Rates and Taxes, Heat and Power. Folio 7. , Contract No. i. Vouchers, Total, Labor, Material, Establishment Charges. Contract No. 2. Contract No. 3. Contract No. 4. Contract No. 5. Same as above. The company is incorporated under the laws of the State of New Jersey with an authorized capital of $350,000 and executes a Debenture Mortgage for $100,000. 5th. The company purchase of Burt & Conant, Real Estate, Leasehold Property, Raw Materials, Stores, Horses, Wagons and Harness, Machinery and Tools, Finished Goods, Book Accounts, Furniture and Fixtures, Missouri Pacific Stock, Coal, Contracts, &c., &c., valued at $514,047.29 in consideration of $300,000 of the Capital Stock and $100,000 of the Debenture Bonds in addition to assuming the following liabiUties: A. Arnold, $105,984.88; Loans and Interest, $32,050.33; Notes Payable, $61,000; Rates and Taxes, $412.50; Creditors' Accounts, $8,824. C, N. C, G. L. Charles Adams, George Wallace and Thomas Hunt, each pay $100, their stock subscription, into the treasury of the company. See Journal entry. Burt & Conant pay into the treasury of the com- pany cash amounting to $94,224.42. The assets of the company have been revalued for the purpose of placing them upon the books as follows: Real Estate, $240,450; Horses, Wagons and Har- ness, $8,740; Machinery and Tools, $45,002; Furniture and Fixtures, $5,650; Leasehold Property, $3,508; Missouri Pacific Stock, $40,800; Raw Materials, $39,016.29; Stores, $126; Coal, $300; Customers' Book Accounts, $18,125; Finished Goods, $2,802; Advertising Contracts, $57,296; Insurance, $1,432; Missouri Pacific Dividend, $1,000. 58 Journal Entries. 5th. The Specialty Manufacturing Company. Incorporated under the Laws of the State of New Jersey with an Authorized Capital of $350,000, Divided into 3,500 shares of $100 each. Plant and Sundry Assets $514,047.29 Cash 94,224.42 $608,271.71 To Burt and Conant, Vendors, for transfer to this company by Burt and Conant, the Vendors, their right, title and interest in the following Assets: Real Estate, Horses, Wagons and Harness, Furniture and Fixtures, Leasehold Property, Missouri Pacific Stock, Raw Materials, Finished Goods, Good Will and Sundry other Assets fully set forth in the deed of conveyance dated May ist and pursuant to a resolution of the Board of Directors, recorded in minute book, page i, for and in con- sideration of 3,000 shares of the Capital Stock of this company and $100,000 in Debenture Bonds and the assumption of the following Liabilities: Burt and Conant $208,271.71 To A. Arnold. . , $105,984.88 Loans Payable ' 32,050.33 Notes Payable 61,000.00 Rates and Taxes 412.50 Creditors' Accounts 8,824.00 Burt and Conant 400,000.00 For three thousand shares of the Capital Stock and one hundred Debenture Bonds, par value $400,000, issued to the vendors . in part payment of the assets sold by them to the Specialty Manufacturing Co. To Capital Stock $300,000.00 Three thousand shares of stock issued by this company as part payment of the amount due Burt and Conant under the terms of a contract dated May ist. Debenture Bonds $100,000.00 59 One hundred bonds, par value $i,ooo each, issued in addition to the above mentioned stock in accordance with the terms of the Bill of Sale alluded to. Chas. Adams $100.00 Geo. Wallace 100.00 Thos. Hunt 100.00 To Capital Stock $300.00 Subscription to Capital Stock issued for cash. Sundries. To Plant and Sundry Assets $514,047.29 In accordance with the resolution of the Board of Direc- tors, the assets of the company have been revalued for the purpose of placing them upon the books of the company under appropriate headings. Real Estate $240,450.00 Horses, Wagons and Harness 8,740.00 Machinery and Tools 45,002.00 Furniture and Fixtures 5,650.00 Leasehold Property 3,308.00 Missouri Pacific Stock 40,800.00 Cost Account. (Raw Material) $39,016.29 (Stores) . 126.00 (Coal) 300.00 39,442.29 Customiers' Book Accounts 18,125.00 Finished Goods 2,802.00 Advertising Contracts 57,296.00 Insurance 1,432.00 Missouri Pacific Dividend 1,000.00 Good Will 50,000.00 Cost Ledger. Charge the Operating Account with the Inventory of Raw Materials, $39,016.29, in Total and Raw Material column, also in Raw Material Account; Stores, $126, and Coal, $300; the last two items to be entered in Operating Account and allo- cated in stores and Fuel Accounts. C, NC, GL. The customers pay into the treasury their various accounts, $18,125. C, NC, GL. . Paid A. Arnold $105,984.88; Loans, $32,050.33; Creditors, $8,824; Sold Missouri Pacific Stock at 125 net, $50,000; Collected Missouri Pacific Dividend, $1,000. 6th. A. V. R., A. v., Purchased of L. Williams raw material, $10,000, Cost. Cost Ledger, Operating Account, Raw Material Account, Voucher No. i. 60 A. V. R., A. v., S. Purchased of Nesbitt & Gompany books and sta- & P. tionery, $500. A. V. R., A. V. Purchased of Lawrence Bush raw material, Cost. $6,000, Voucher No. 2. (Cost Ledger, Operating Account, Raw Material; Raw Material Account, Total and Stock.) C, NC, CA. Paid Labor, $4,000; Voucher No. 3; Charge Cost Account in General Ledger. (Cost Ledger, Operating Account, Labor; Contract No. i, $2,500; Contract No. 2, $500; Contract No. 3, $500; Contract No. 4, $200; Contract No. 5, $200. Heat and Power, $100.) C, NC, GL. Office Salaries, $400; Officers' Salaries, $1,000. C, NC, CA. Stable Expense, $50; Superintendent, $500. (Cost Ledger; Operating and Establishment Charges, Voucher No. 4.) A. V. R., A. v., M. Purchased of Bogota Machine Company, new & T. machinery, $3,000. A. V. R., A. v., C Purchased of Bogota Machine Company, machin- A. • ery to replace worn-out machines, $600. Vouch- er No. 5. (Cost Ledger, Operating Account; Heat and Power.) A. V. R., A. v., Purchased of Sommerville Paper Box Company CA. boxes for special orders, $1,000, Voucher No. 6. (Cost Ledger, Operating Account, Total, Stores; Total.) Stores. 8th. A. V. R., A. v., C Purchased of Soot & Company coal, $950; wood, A. $100. Total, $1,050. Voucher No. 7. (Cost Ledger, Operating Account, Fuel Account, Total.) A. V. R., A. v., Purchased of C Bogart & Company, raw mate- CA. rials, $19,000; Voucher No. 8. -(Operating Ac- count; Raw Materials.) C, NC, AV. Paid Geo. F. Nesbitt & Co. bill of 6th inst., $500. A. V. R., A. v., Received bill of New York Window Cleaning Co. CA. for work in factory, $40. (Cost Ledger, Oper- ating Account, Total, Factory Expense; Es- tablishment Charges; Total, Factory Expense, Voucher No. 9.) A. V. R., A. v., Received bill of Jansen & Co. for care of horses, CA. $50. (Cost Ledger, Operating Account; Estab- lishment Charges; Voucher No. 10.) loth. C, NC, CA. Paid Labor, $6,000; Voucher 11. (Cost Ledger, Operating Account, Contract No. i,$5oo; Con- tract No. 2, $1,500; Contract No. 3, $1,100; 61 Contract No. 4, $2,000; Contract No. 5, $800; Heat and Power, $100.) C, N. C, C. A. Paid Superintendent, $500; Stable Expense, $50. Voucher No. 12. (Cost Ledger as per former similar entry.) C, N. C, G. L. Office Salaries, $400; Officers' Salaries, $1,000. C, N. C, V. R. Paid Window Cleaning Company, $40. C, N. C, V. R. Paid Jansen & Co., $50. As the month's record is incomplete the depre- ciation is arbitrarily made and has no connection with the former accounts. The following overhead charges are to be charged to Cost Account in the General Ledger and to Operating Account in the Cost Ledger. Journal. Cost Account $5,802.93 To Insurance $119.33 Advertising 4,775.50 Depreciation Ma- chinery and Tools. 300.00 Depreciation Horses, Wagons and Harness 100.00 Lease 275.60 Rates and Taxes. . . 232.50 Cost Ledger. Enter the following items in Operating Account under appropriate headings, also in Establish- ment Charges as overhead charges for the period: Insurance, $119.33 i Advertising, $4,775.- 50; Depreciation, $675.60; Rates and Taxes, $232.50; Voucher No. 13. Total, $5,802.93. The corporation has taken five contracts and from the time cards of the laborers. Contract No. i is charged with 15,000 hours' labor; Contract No. 2 with 10,000 hours' labor; Contract No. 3 with 8,000 hours; Contract No. 4, 11,000 hours; Contract No. 5 with 5,000 hours, at 20 cents per hour. The storekeeper's books show Contract No. i is charged with raw material, $15,000; Contract No. 2, $5,000; No. 3, $10,000; Contract No. 4, $5,000; Contract No. 5, $5,000. The Estab- lishment Charges are to be apportioned ac- cording to the time spent on each contract. J. Contract No. i is chargeable to Joe Sam Brown for $25,000; No. 2 to Pine, Twig & Co. for $11,000. No. 3, Hardwood & Company, $16,000; No. 4, Smith, Curtis & Company, $12,000; No. 5, Whitehouse & Company, $8,000. 62 Charge these amounts to the above named parties and credit Contract Account with the total amount or open an account with each contract if desirable. Cost Ledger. Charge each contract with the amount of raw material chargeable to each, and enter the amount in Raw Material Account under a col- umn headed Consumed, as Voucher No. 14. Charge Heat and Power with fuel, $1,250, and enter the same amount in a column headed Consumed in the Fuel Account. Voucher No. 15. Transfer the total of Heat and Power to Estab- lishment Charges amounting to $2,050, as this is a general factory charge that affects all con- tracts and cannot be charged to a specific piece of work. On the lower half of folio 6, write Distribution of Establishment Charges and head the columns to correspond with those of Establishment Charges; in the Voucher column write Contract i 2 3 4 5 The total Establishment Charges amount to $9,042.93-^49,000 hours = .1845499 = Contract No. i, 15,000 hours x .1845499 . . . $2,768.25 2, 10,000 " " " ... 1,845.50 3, 8,000 " " " ... 1,476.40 4, iT,ooo " " " ... 2,030.03 5, 5,000 " " " ... 922.75 Total Establishment Charges to be allo- cated $9,042.93 ^3 1^ Oj i79699ss- = ?6'si7o6 -^ oSos* o s2 O ^ goiZSso- = £6-zfo6 ^ oS-z£z si ft+3 Q o J^ soiZl^Zo' = £6-zfo6 -^ 09*9^9 VO 10 J^ is6ogsS- = £6-zfo6 h- o^'SZU 3« CO S 6S6ieio- = £6-zfo6 -4- ee-6ii M M >> «-■ . o ft rl- t- rooo 00 (N M to ON O CS 00 O 00 rj- M eS-9f = £znoo- X ol7-9Zl7i §. eest'l/oo- = £6-z1/o6 -5- ot' H o CO On !>. O NvO "^vO CO °. ^9-0?! = ZgSpio- X oS-Sl^gi 10 SZgSgio* = £'6"si^o6 -j- oSi ^ O "^ CO VO ■ CO . ro CN r^oO '^ O On d., at $4.90, $152.56. Account Sales, Julio Bonzano, 250 cases. Steamer Letimbro Sale, $1,050; Duty, $62.50; Custom House Brokerage, $1.25; Freight, $122.50; Cart- age, $6.25; Insurance, $7.87; Auction Charges, $10.50; Interest, $5.25; Commission, $52.50. Net Proceeds, ;^i59 9^. 4s. 2d., at $4.90^ Si4,i50-75- Cable, $1.25. Brown & Selcomb guarantee the sales made by them for a consideration of 1%, and make a further advance of $15,500. Fava draws his drafts on Smith, Payne & Smith, London, for the net proceeds of all the accounts but Gaetano Botta's, for whom we purchase Brown Bros. & Company, a sight bill, £2,SSy i8s. 2d., at $4.90, $14,150.75. Make entry as follows: L. Rizzo, St. Let- imbro ;^39 95. 4d. G. Aita 60 05. od. Tomasso Caval- laro 31 2S. 8d. Julio Bonzano.. . . 159 gs. 4d. To Smith, Payne & Smith ;^290 is. 4J. SterHng Control- ling Account. . .£2,88^ 18s. 2d. $14,150.75 Post from the Cash Book and charge (from the above entry) Gaetano Botta's Account with ;^2,887 i8s. 2d. (sterling only). Paid Ofhce rent, $25. 71 J. Charge Docu- mentary advance and credit C. Bros. Sterling only ;^iQo. Cash. Cash. Controlling Account and S. P. & S. Cash. Back part of Account Sales Book. Cash. Cash. Account Sales. Account Sales. Cr. Doc. Adv. Cr. M. Ins. Cr. B. Com. Cr. Rotino. G. Fava drew for his personal account, $50. Paid Insurance Premium, $5.75. Paid Cartage, $7.50. 4th. Received Ex. Steamer Morro Castle, 4,000 boxes oranges, as follows: Pasquale Rotino, 500 boxes, upon which he had drawn on the bankers, Carvalho Brothers, Lon- don, ;^ioo, which G. Fava accepts. G. Botta, 3,000 boxes; L. Rizzo, 300 boxes; G. Aita, 200 boxes. Borrowed from Brown & Selcomb on account Morro Castle shipment, $6,000. Purchased of Ladenburg, Thalman & Company, New York, 60 days sight draft, £s^o, at $4.88, $2,440.00. 'Remitted to Smith, Payne & Smith, London, as a deposit, draft at ;^5oo. Brown & Selcomb render their Account Sales for Letimbro consignments; Gross Sale, $20,547.50; Auction Charges, $205.48; Guarantee, $205.46; Cartage, $12.50. Net Proceeds, $20,026.21. In- terest advances, $97.85. Received check from Brown & Selcomb, balance due on Letimbro, $276.21. Paid freight on Morro Castle consignment, $3,920. Paid Custom House Brokerage, $2.50. Paid Duty, $1,000.00. 5th. Brown & Selcomb sell the cargo at auction and Fava makes up his Account Sales as follows: Pasquale Rotino Sale, $1,700.00; Duty, $125; Custom House Brokerage, $1.50; Freight, $490; Cartage, $1.25; Insurance, $2.50; Cable, $1.25; Auction Charges, $17.00; Interest, $8.50; Com- mission, $85. Net Proceeds, ;^i98 155. $d., at $4.87, $968. Statement: Net Proceeds ;^i98 155. ^d. Documentary Ad- vance £100 o-^- o<^- Marine Insurance 155. od. Banker's commis- sion I OS. od. loi 155. od. £91 OS. sd. Gaetano Botta Sale, $13,550; Duty, $750; Cus- tom House Brokerage, $2.50; Freight, $2,940; 72 Cash. Cash. Back of Account Sales. Cash. Account Sales. Cartage, $15; Insurance, $4.00; Cable, $1.25; Auction Charges, $135.50; Interest, $67.75; Commission, $677.50. Net Proceeds, ;^i,827 95. 2d., at $4.90, $8,956.50. L. Rizzo Sale, $1,375; Duty, $75; Custom House Brokerage, $1.00; Freight, $294; Cartage, $1.50; Insurance, 75c.; Cable, $1.25; Auction Charges, $13.75; Interest, $6.87; Commission, $68.75. Net Proceeds, ;^i86 35., at $4.90, $912.13. G. Aita Sale, $1,300; Duty, $50; Custom House Brokerage, 50c.; Freight, $196; Cartage, 75c.; Insurance, $1.00; Cable, 75c.; Auction Charges, $13.00; Interest, $6.50; Commission, $65.00. Net Proceeds, ;,^i97 45. iid., at $4.90, $966.50. Purchased of Smith, Jones & Robinson, Bankers, Bills of Exchange of London for ;^97 05. $d., £1,82^ 95. 2d., ;£i86 35., £197 4s. lid., total, ;^2,307 175. 6d., at $4.87, $11,239.34, which was remitted by G. Fava to the above shippers. Brown & Selcomb advanced $11,000. Paid Cable, $4.50. 6th. Brown & Selcomb render Account Sales, Steamer Morro Castle; Gross Sale, $17,925; Auction Charges, $179.25; Guarantee, $179.25; Cartage, $18.50; Interest, $87.74. Net Proceeds, $17,- 460.26. Brown & Selcomb pay check for balance of Morro Castle consignment, $460.26. 8th. Received consignment Steamer Trinacria: L. Rizzo, 500 boxes which sold for $2,500.00; Duty, $125.00; Custom House Brokerage, $2.50; Freight, $245; Cartage, $12.50; Insurance, $18.75; Auction Charges, $25; Commission, $125; Interest, $12.50. Net Proceeds, $1,933.75; ;i^394 135., at $4.90. G. Aita, 1,000 boxes, sold for $4,000; Duty, $2 50; Custom House Brokerage, $5; Freight, $49^5 Cartage, $25; Insurance, $30; Auction Charges, $40; Interest, $20; Commission, $200. Net Proceeds, $2,940; ;^6oo. Tomasso Cavallaro, 1,000 boxes, sold for $2,475; Duty, $250; Freight, $490; Cartage, $25; In- surance, $18.50; Custom House Brokerage, $5; Auction Charges, $24.75; Interest, $12.40; Commission, $123.70. Net Proceeds, $1,525.65; ;^3ii 6s. 6d. 73 Julio Bonzano, 2,500 boxes, sold for $10,500; Duty, $625; Custom House Brokerage, $5; Freight, $1,232.50; Cartage, $62.50; Insurance, $78.70; Auction Charges, $105; Interest, $52.50; Commission, $525. Net Proceeds, $7,813.80; ;^i,594 135. Cash. Brown & Selcomb advanced $18,500 on shipment Steamer Trinacria. Paid Freight, $2,457.50; Duty, $1,250; Brokerage, $10. Paid Insurance Premium on floating poHcy, $150. Purchased Bills of Exchange for ;^394 135., ;^6oo, ;^3ii 6s. 6d., ;^i,594 135.; total, ;^2,90o 125. 6d. Paid Scott & Company, Bankers, for the above drafts, $14,213.15. Remitted drafts to consignors of Trinacria as above. Brown & Selcomb render Account Sales, Trinacria ; Gross Sale, $19,475; Auction Charges, $194.75; Guarantee, $194.75; Cartage, $115; Interest, $92.50. Proceeds, $18,878. Check from Brown & Selcomb, $378, in settlement of sales of Trinacria. Cash. Purchased of Brown Brothers & Company, Ex- change on London for ;^ioi 155., at $4.86, $494-5i- Post from Cash. Remitted the above bill to Carvalho Brothers to cover Documentary Advance Ex. Steamer Morro Castle, ;^ioi 155. Close the nominal accounts to Profit and Loss. Transfer the Marine Insurance and Banking Commission to Carvalho Brothers' Account. The current rate for Sight Exchange is $4.90, at the date of closing the books. To ascertain the profit or loss on exchange, make the following entry. SterHng Exchange Account' (New) ;^209 i8s. Sd. at $4.90 $1,028.67 To Sterling Exchange Account (Old) ;^209 i8s. 8d $1,028.67 74 Sterling Controlling Account. ^2887 500 2307 18 17 12 15 2 6 6 2 $14150 2440 11239 14213 494 75 34 15 51 3177 2409 2900 19 12 12 6 6 6 6 8 2 15572 1 1803 14213 07 13 20 lOI 8488 Balance 209 4 18 41588 1028 40 8698 P.&L. 3 42537 79 75 32 67 8698 3 2 42617 07 8698 3 42617 07 209 18 8 1028 67 OF THE "^ »Si^GB Nl^ 75 UNIVERSITY OF CALIFORNIA LIBRARY STAMPED B^|OW^ DEC 26 ]m 30m-l,'15 Pract i ce Woa .H.193394 1 acr.o -anting .D4: HF^^ 193394 UNIVER!