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Full text of "Supplementary exercises for schools of accountancy and business administration"

UC-NRLF 

III 



7~3f — 




Supplementary Exercises for Schools of Accountancy 
and Business Administration 



Supplementary Exercises for Schools of Accountancy 
and Business Administration 



ALFRED J. THOMPSON 

Supervisor of Freshman Accounting, Northeastern College 
Boston Young Men's Christian Association 



ASSOCIATION PRESS 

New York: 347 Madison Avenue 
1920 



rtFs-ui 

T3? . 



Copyright, 1920, by The International Committee of 
Young Men's Christian Associations 



.. i : •■ ?: .-. • -. 



FOREWORD 

As an aid to Associations desiring to conduct courses in Accountancy, 
the Commission offers this series of exercises prepared by Alfred J. 
Thompson of the Boston Young Men's Christian Association, in addition to 
the synopsis of class sessions for the first year, as given in Syllabus B-17. 

These exercises are not new or untried, but are the product of seven 
years' experience in a successful school of commerce in a large Associa- 
tion. They may, therefore, be used with full confidence in their practical 
value. 

The Commission realizes that questions will inevitably arise in connec- 
tion with these outlines, and welcomes criticisms and suggestions. It 
stands ready to explain any points submitted for judgment. Address 
Executive Secretary, 347 Madison Avenue, New York, N. Y. 

COMMISSION 

D. S. Sylvester, Boston G. H. Newlove, Washington 

H. C. Daines, Chicago F. L. Roth, Cleveland 

C. A. Wesp, Philadelphia W. P. Dies, Detroit 

William Orr, Editor 



X 



456560 

7° 



The following problems are to be posted to ledger accounts, four accounts to a page, and are designed to 
show, in a simple manner and in double entry form, the relations of the accounts to each other. 

EXERCISE A 
"Student," Proprietor 

April 1. "Student" commences business this day and deposits in his bank $5,000. (Debit "Cash" $5,000, 
credit account with yourself "Capital" $5,000.) 

2. Purchased Mdse. for cash $3,000. (Debit "Purchases," credit "Cash.") 

3. Sold Mdse. for cash $125. (Debit "Cash," credit "Sales.") 
8. " " " " $600. 

10. " " " " $525. 

11. Bought Mdse. for cash $700. 
15. Sold Mdse. for cash $750. 
20. " " " " $260. 
25. " " " " $480. 
30. " " " " $183. 

Make Trial Balance on journal paper. 

Questions: 

1. If the selling price is 120% of the cost, what is the cost of goods sold? 

2. What is the cost of the goods unsold ? 

3. What is the profit on the goods sold ? 

EXERCISE B 
J. T. Brooks, Proprietor 

May 1. Mr. Brooks commences business by depositing $10,000. 

2. Purchased for cash, Mdse. $9,000. 

5. Sold for cash, Mdse. $5,000. 

10. " " " " $6,000. 

11. Bought for cash, Mdse. $3,000. 



13. 


(< « 


%t < 


' $2,000. 


16. 


Sold 


<< < 


' $4,000. 


17. 


Bought " 


<< < 


' $8,000. 


20. 


Sold 


<< % 


$2,200. 


25. 


« << 


« < 


' $4,150. 


26. 


Bought " 


<( « 


' $2,950. 


31. 


Sold 


c( < 


' $1,340. 


31. 


Make Trial Balance. 





The cost of goods on hand May 31, per inventory, is $6,798. Find the cost of goods sold and the per- 
centage of profit to sales. 

EXERCISE C 
"Student," Proprietor 

June 1. "Student" commences business this day and deposits $7,000 in the Security National Bank. (Debit 
"Cash," credit an account headed with your own name followed by "Capital.") 
Bought of Bacon & Co. to be paid for in ten days, Mdse. $10,000. (Open an account with "Bacon 
& Co." and credit it $10,000. Debit Purchases.) 

3. Sold for cash, Mdse. $1,000. 

4. " " " " 800. 
8. " " " " 1,500. 

[1] 



10. Sold to Marvin &Go«,.tc<be, paid; for in rO'days, Mdse. $2,000. (Open an account with "Marvin 

& Co.," and- debit is'^Obd. : -(br'e'dit "Sales.) 

11. Paid Cash to Bacon & Co. for bill of June 1. 

12. Sold for cash, Mdse. $1,260. 

Bought of Bacon & Co. at 10 days, Mdse. $7,250. 
15. Sold to Marvin & Co. at 10 days, Mdse. $3,000. 

18. Sold for cash, Mdse. $2,480. 

19. " " " " $2,000. 

20. Received cash of Marvin & Co. for bill of June 10. 
22. Paid cash to Bacon & Co. for bill of June 12. 

25. Received cash of Marvin & Co. for bill of June 15. 
28. Bought of Bacon & Co. at 10 days, Mdse. $3,400. 

30. Sold Marvin & Co. at 10 days, Mdse. $3,500. 
Make Trial Balance. 

Questions: If the profit is 25% of the sales, what is the cost of goods sold? What is the cost of the goods 
on hand? 

EXERCISE D 

July 1. "Student" commences business by depositing in the Security National Bank, $8,000. 

2. Purchased a stock of goods for cash $6,000. 

3. Bought of Daniels & Herrick, Mdse. at 10 days, $2,500. 
5. Sold to Martin & Co. at 10 days, Mdse. $425. 

8. Cash sales of Mdse. $210. 

9. Sold for cash to Lee & Co., Mdse. $260/ 

10. " " " " Naman & Gooch, Mdse. $850.75. 

12. Sold to Martin & Co. at 10 days, Mdse. $728.60. 

13. Paid cash to Daniels & Herrick for bill of July 3. 

15. Received cash from Martin & Co. for bill of July 5. 

16. Paid A. W. Marsh, clerk, $15. (Open an account with "Expense," and debit it for the $15. Credit 

Cash. ) 
18. Sold Martin & Co. for their note at 10 days, Mdse. $2,150. (Open an account with "Notes Re- 
ceivable" and debit it with $2,150. Credit Sales.) 

22. Paid A. W. Marsh, clerk, $15. 

Received cash of Martin & Co. for bill of July 12. 

Sold White & Benjamin, Mdse. for their note at 20 days, $267. 

23. Bought of Daniels & Herrick for my note at 10 days, Mdse. $450.75. (Open an account headed 

"Notes Payable," and credit it for $450.75. Debit Purchases.) 
28. Paid cash to J. B. Emerson, express charges for the month on goods sold, $18. (Debit Expense.) 
Received cash of Martin & Co. for their note of July 18. 

31. Student withdraws, for personal use, cash $50. (Debit "Student's Capital" account.) 
31. Make Trial Balance. 

EXERCISE E (MODEL) 

January 1, 1915 
A. W. Swenson commences business by depositing $10,500 in the National Shawmut Bank. 

January 2. 
Hired store, No. 1492 Columbus Ave., of M. Holmberg and paid him $125 for rent, one month in advance. 

January 3. 
Bought for cash of the Baker Furniture Co. office and store furniture, as per bill, $260. 

January 5. 
Bought of the Simmons Hardware Co., to be paid for in 10 days, Mdse. as per invoice, $1,245.60. 

[2] 



January 8. 
Bought of the Ames Plow Co. to be paid for in 10 days, Mdse., as per invoice, $1,540.90. 

January 11. 
Bought of the Globe Nail Co. at 30 days, Mdse. $428.75. 

January 13. 
Bought of the Taunton Stove Co. at 30 days, Mdse. $642.80. 

January 15. 
Paid cash to the Simmons Hardware Co. for bill of January 5, less 2% discount. 
Bought of Dame, Stoddard & Co. at 30 days, cutlery, as per invoice, $460.75. 

January 18. 
Paid cash to the Ames Plow Co. for bill of January 8, less discount 3%. 

January 19. 
Sold to J. C. Atwood at 10 days, Mdse., as per bill, $140.60. 

January 21. 
Cash sales of Mdse. to date $170.50. 

January 22. 

Sold to Bowers & Co. on account, Mdse. $346.50. (In this problem if no term of credit is mentioned, 30 
days is to be understood.) 

January 23. 
Cash sales to date $210.90. 

January 25. 
Sold to J. P. Caldwell, Mdse., on account, $160.25. 

January 26. 
Bought of the Piper Mfg. Co. for my (Swenson's) note at 20 days, Mdse., as per invoice, $1,140.60. 

January 27. 
Sold Mdse. to L. G. Stetson for his note at 30 days, $340. 
Cash sales to date, $290.34. 

The National Shawmut Bank has discounted L. G. Stetson's note, and has placed the net proceeds to my 
credit. (Net proceeds $338.30, discount $1.70.) 

January 28. 
Sold Burton & Holmes, Mdse. on account, $460.80. 

January 29. 
Cash sales of Mdse. to date $75.80. 

J. C. Atwood notifies Mr. Swenson that he cannot pay his bill of January 19 and offers his note at 30 days. 
Mr. Swenson agrees to take this note, providing the note is made to cover the debt and 30 days' interest, 
which is accordingly done. 

January 30. 
Mr. Swenson withdraws $100, which is to be considered as payment for his services. 
Paid Phillip Lee, salesman, for one month, $80. 

Required: 

(a) Journal entries for all transactions. 

(&) Ledger Accounts. 

(c) Trial Balance. 

(d) Profit and loss statement. 

(e) Balance Sheet. 
(/) Closing entries. 

Merchandise inventory January 30, 1915, taken at cost, $3,891.40. 

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12 



EXERCISE NO. 100 



This problem is given as a drill in bookkeeping technique, 
fully studied. 



The details of Model Exercise E must be care- 



Required: 

(a) Make journal entries of transactions in the same manner as given in Model Exercise E. 

(b) Post the journal entries on to ledger sheets, opening and arranging accounts as follows: 



Account Lines 

Cash 21 

E. B. Lowney 6 

K. W. Buck 5 

C. A. Blake 5 

Henry Wenz & Co 4 

Brett & Blish 6 

Notes Receivable 6 

Inventory 4 

Furniture & Fixtures 5 

Armstrong & Co 6 

Avery Manufacturing Co 4 

C. W. Coffin & Co 5 



Account Lines 

Coburn & Co 4 

Everett & Co 4 

Thomas E. Cooper, Capital 6 

Sales 18 

Purchases . . . . 10 

Freight In 9 

Expense 10 

Purchases Discount 8 

Sales Discount 9 

Interest 7 

Profit and loss 8 



(c) Make trial balance. 

(d) Make profit and loss statement. 

(e) Make balance sheet. 

(/) Make closing journal entries and post them into ledger. 

(g) Rule off accounts that balance. 

(h) Rule and bring down the balances of cash and proprietor's accounts. (See model form.) 

N. B. As a matter of convenience the arrangement of ledger accounts conforms to the order in which 
they are used on the balance sheet and profit and loss statement. 

Points to be observed: 

On the balance sheet do not give the names of the customers' accounts. Place their total against "Accounts 
Receivable." Carry out the same idea in creditors' accounts, placing the total against "Accounts Payable." 

ABBREVIATIONS SHOULD NOT BE USED AND PUNCTUATION WILL BE REQUIRED ON 
BALANCE SHEETS AND PROFIT AND LOSS STATEMENTS. 

When necessary, abbreviations may be used in journal entries, provided their use will not obscure the 
meaning. 

Form and arrangement are of first importance in all work. 

Model forms must be carefully studied and will be furnished to the students as needed. 

"Freight In" is to be added to the purchases on the profit and loss statement as follows : 



Deduct — Cost of Goods Sold : 

Purchases 

Freight in 



$10,666.50 
67.29 



Deduct — Inventory of January 30, 1918. 



$10,733.79 
6,444.50 



$4,289.29 



[131 



TRANSACTIONS 
EXERCISE NO. 100 

January 1, 1918 
Thomas E. Cooper has been employed as a business manager for a large concern, and has left his position 

to go into business for himself. He is favorably known and is able to obtain credit. 
Deposited $7,000 in First National Bank. 

Gave check for $200 to Whidden & Co. for store and office furniture. 

Paid $25 for various utensils and tools to be used about the store and office. (Debit Expense.) 
Hired store No. 1253 Ash Street, agreeing to pay $100 per month in advance. Gave check to Savage & Co. 
for January rent. 

January 2. 

Bought of Armstrong & Co., Mdse. 4/10 N/30 (4% discount if paid in 10 days, net 30 days), $2,855. 
Paid freight on above $20.49. (Debit "Freight In" account.) 
Bought of C. W. Coffin & Co., Mdse., 3/10 N/30, $1,875.50. 
Paid freight on above $17.20. 

January 4. 

Bought of Avery Mfg. Co., Mdse. at 30 days net, $1,429.80. 
Paid freight on above $10.80. 

January 5. 
Sold Mdse. to C. L. Patch for cash $250. 
Bought Mdse. of Coburn & Co., 5/10 N/60, $894.75. 
Paid freight on above $7.60. 

January 6. 
Sold Mdse. to E. B. Lowney, 2/10 N/30, $150.72. 
Sold Mdse. to K. W. Buck, 3/10 N/30, $451.20. 
Cash sales of Mdse. $78.90. 
Post into ledger all transactions up to this point 

January 9. 
Sold Mdse. to C. A. Blake at 10 days, net, $230.60. 
Paid H. O. Holmes, clerk for services one week, $15. 

January 11. 
Sold Mdse. to Henry Wenz & Co., 3/10 N/60, $750.94. 
Bought of Armstrong & Co., Mdse., 4/10 N/60, $1,450.75. 
Paid freight on above $11.20. 
Sold Mdse. to E. B. Lowney, 2/10 N/30, $172.75. 
Cash sales $28.90. 

Paid Armstrong & Co. for bill of January 2, less discount. 
Paid C. W. Coffin & Co. for bill of January 2, less discount. 

January 14. 
Sold Mdse. to Brett & Blish, 3/10 N/30, $445.20. 
Cash sales $126.40. 
Post into ledger all transactions up to this point. 

January 15. 
Paid Coburn & Co. bill of January 5, less discount. 

January 16. 
Received cash of E. B. Lowney for bill of January 6, less discount. 
Received cash of K. W. Buck for bill of January 6, less discount. 
Paid H. O. Holmes, clerk $15. 
Cash sales $52.40. 

[14] 



January 19. 
Bought of Everett & Co. at 30 days, 1 typewriter $85. (Debit "Furniture and Fixtures.") 

January 22. 

Sold Mdse. to Miller & Co. for their note at 60 days, $625. 

C. A. Blake, being unable to pay his bill of the 9th inst, Mr. Cooper took his note at 60 days, the amount 

of the note including the debt and 60 days' interest on the debt. 
Received cash of E. B. Lowney for bill of January 11, less discount. 

January 25. 

The First National Bank has discounted Miller & Co.'s note of the 22nd inst. Net proceeds passed to my 

credit, $619.07. 
Paid H. O. Holmes, clerk, $15. 
Sold Mdse. to Brett & Blish at 30 days, $1,240.50. 
Bought Mdse. of C. W. Coffin & Co., 4/10 N/30, $2,16070. 
Received cash of Brett & Blish for bill of January 14, less discount. (Allow the discount although Brett & 

Blish are one day late in remitting.) 

January 26. 
Gave Brett & Blish credit for goods returned $16.40. (Debit Sales account.) 

January 30. 
Paid H. O. Holmes $15. Mr. Cooper withdraws $100 for his services. (Debit Expense account.) 

INVENTORY OF MDSE. ON HAND, JANUARY 30, 1918, TAKEN AT COST, $6,444.50. 



1151 



TRIAL BALANCE OF B. D. PETERS, DECEMBER 31, 1917 

Cash $1,250.00 

A. C. Davis 425.60 

T. B. Walthers 560.00 

W. A. Seymour 215.40 

B. A. Salmon 675.80 

Notes Receivable 42.50 

Furniture and Fixtures 1,000.00 

Cohen & Small $128.60 

Harrison & Co 250.90 

Notes Payable 64.60 

B. D. Peters, Capital 5,700.00 

Purchases 11,769.00 

Sales 13,250.00 

Expenses 3,455.80 

$19,394.10 $19,394.10 



Cost of Merchandise on hand December 31, 1917 $3,214.26 



TRIAL BALANCE OF A. L. FRENCH, DECEMBER 31, 1917 

Cash $2,578.95 

Accounts Receivable 6,675.21 

Merchandise Inventory December 31, 1916 10,020.30 

Delivery Equipment 1,800.00 

Furniture and Fixtures 2,500.00 

Accounts Payable $4,275.60 

Notes Payable 1,000.00 

A. L. French, Capital 17,000.00 

Sales 53,650.90 

Sales Returns 340.60 

Purchases 40,325.71 

Freight Inward 625.80 

Delivery Expense 1,058.20 

Selling Expense 6,923.83 

General Administrative Expense 3,077.90 

$75,926.50 $75,926.50 

Cost of Merchandise on hand December 31, 1917 $10,482.57 



[16] 



EXERCISE NO. 101 
H. C. Chase 

Trial Balance, September 30, 1918 

Cash $428.65 

Accounts Receivable 4,280.60 

Notes Receivable 228.00 

Inventory, July 1, 1918 2,800.00 

Office Equipment 475.00 

Store Equipment 650.00 

Delivery Equipment 1,200.00 

Accounts Payable $2,161.60 

H. C. Chase, Capital 6,465.00 

H. C. Chase, Personal 75.00 

Sales (Dr. $156.25, Cr. $13,365.99) 13,209.74 

Purchases (Dr. $9,661.55, Cr. $410.90) 9,250.65 

Freight Inward 165.80 

Selling Expense 1,675.00 

General Administrative Expense 510.00 

Purchase Discount 245.68 

Interest on Notes Receivable 2.28 

Loss on Bad Accounts 345.60 



$22,084.30 $22,084.30 



Inventory of merchandise on hand September 30, 1918, taken at cost, $3,060.49. 

Required: 

(a) Working sheet 

(b) Profit and loss statement 

(c) Closing entries 

"Loss on Bad Accounts" is not an operating expense and on the profit and loss statement should be placed 
under "Other Charges." 

The debit and credit postings of the Sales and Purchase accounts are to be used in the profit and loss 
statement only. Use balances of accounts for closing entries. 



[17] 



PERCENTAGE 

Per cent is the common name for hundredths. 

The symbol % may be read per cent or hundredths. 

Percentage is the process of computing by per cents or by hundredths. 

.50 may be read fifty hundredths, fifty per cent or one half. 

.045 may be read four and one-half per cent, four and one-half hundredths or forty-five thousandths. 

.005 may be read one-half of one per cent or five thousandths. 

The terms used in percentage are the base, the rate, and the percentage. The base is the number of which 
a per cent is taken; the rate is the number of hundredths to be taken of the base; the percentage is the 
result obtained by taking so many hundredths or a certain per cent of the base. 

In the expression "10% of $200 is $20," $200 is the base, $20 is the percentage, and 10% is the rate. 

FINDING THE PERCENTAGE 

Multiply the base by the rate and the product will be the percentage. 

Example. What is 25% of $452? 

Solution. 25% of a number equals .25 of it. 

$452 
.25 



2260 
904 



$113.00=Answer. 

As 25% equals J4 of 100%, it is obvious that if $452 is divided by 4 the result will be the same as multi- 
plying by .25. 

4)452 



113 



IN THE MULTIPLICATION OF DECIMALS, POINT OFF AS MANY PLACES IN THE PRODUCT 
AS THERE ARE DECIMAL PLACES IN BOTH MULTIPLICAND AND MULTIPLIER. 

Fractional value of per cents frequently occurring: 

Per Cent Fractional Value Per Cent Fractional Value 

12 1/2 1/8 20 1/5 

25 1/4 16 2/3 1/6 

37 1/2 3/8 33 1/3 1/3 

62 1/2 5/8 66 2/3 2/3 

1. A hardware merchant compromised with his creditors, paying 33 1/3% of the amount of his debts. If 
he owed A $750, B $2,176.20, and C $3,488.37, how much did each receive? 

2. A merchant paid the following bills, less the discounts named : $2,421.60 less 4% ; $210 less 3% ; $752.80 
less 3^2%. What was the net amount paid? 

3. A wholesale grocer bought 240 bbls. of flour at $10 per bbl. He sold 66 2/3% of it at $12 per bbl. and 
the remainder, which was damaged, for $9 per barrel. Did he gain or lose and how much ? 

4. The net sales of a business were $125,640.90; the gross profit was 33 1/3% of the net sales, and the net 
profit 17% of the gross profit. What was the net profit? 

r is i 



5. A business block was bought for $125,000. 38% of the cost was spent for remodeling and the block 
was then sold for $185,000. How much was gained? 

6. What is 115% of 1,000? 

7. What is 120% of 600; of 2,100; of 3,000? 

8. Find 12% of 2,800. 

9. Find 20% of 2,500. 
10. Find 16 2/3% of 200. 

FINDING THE RATE 

If multiplying the base by the rate will equal the percentage, it follows that if the percentage is divided 
by the base, the quotient will be the rate. Thus 12% of 125=15. If the base (125) and the percentage (15) 
were given, to find the rate, we should divide the percentage by the base as follows : 

.12=12% 



125)15.00 
125 



250 
250 



IN DIVISION OF DECIMALS POINT OFF AS MANY PLACES IN THE QUOTIENT AS THE 
NUMBER IN THE DIVIDEND EXCEEDS THOSE IN THE DIVISOR 

What per cent of : 

1. 8,000 is 2,400? 

2. 3,600 is 600? 

3. 1,312 is 328? 

4. 2,600 is 169? 

5. The net sales of a business are $75,280.60 ; the gross profit on sales is $26,348.21 ; the operating expenses 
are $15,808.93; the net profit is $10,539.28. Find (a) the rate per cent of gross profit on sales to net sales; 
(b) the rate per cent of operating expenses to net sales; (c) the rate per cent of net profit to net sales. 

6. In question No. 5 the investment of the proprietor was $52,696.42. Find the rate per cent of net profit 
to investment. 

7. An agent sold a parcel of real estate for $10,500 and received $262.50 for his services. What per cent 
did he receive ? 

8. A and B engage in business with a capital of $50,000. A invests $26,000 and B the remainder. What 
per cent of the total capital did each invest? 

9. A house was bought for $3,500 and sold for $4,200. What per cent was gained ? 

10. A traveling salesman earned a commission of $1,284.05 on sales of $25,680.95. What per cent did 
he receive on the sales? 

Find the rate per cent of gross profit on sales to net sales from the following figures : 
Net Sales Gross Profit on Sales 

11. $140,000.00 $42,000.00 

12. 128,560.75 33,425.80 

13. 80,110.45 18,124.25 

[19] 



Find the rate per cent of cost of goods sold to net sales from the following figures : 

Net Sales Cost of Goods Sold 

14. $46,280.60 $27,768.36 

15. 64,258.69 41,318.34 

16. 7,540.80 4,237.93 
Find the rate per cent of net profit to net sales from the following figures : 

Net Sales Net Profit 

17. $41,480.29 $10,216.18 

18. 100,218.94 15,249.27 

19. 75,342.01 9,462.31 

FINDING THE BASE 

The quotient of the percentage divided by the rate equals the base. 

Example: 45.3 is 20% of what number? 
226.50=Base 



Solution : .20) 45.30 

1. If the attendance in the Freshman class is 114 in one evening and that number is 95% of the total 
number, how many are absent? 

2. We agree to give a customer a discount of 2% on his cash payments and accordingly he remits $298.90. 
What amount should be placed to his credit? (To prove the answer, find 2% of the base, and deduct the 
percentage from the base. The result will be $298.90.) 

3. If the net profit is $2,940 which is 12% of the sales, what is the amount of the sales? 

4. A customer remits $596.82 to pay a bill on which there is allowed a discount of 3%. What is the 
amount of the bill? 

5. We buy real estate and give a mortgage for $15,000 which was 33 1/3% of the price paid for the prop- 
erty. What was the price paid? 

TRADE DISCOUNT 

Trade discount is a deduction from the catalog or list price in order to arrive at the actual selling price of 
the goods. Different conditions as to the quantity of goods sold, the state of the customer's credit, etc., 
cause the discounts to vary. One customer may receive a discount of 25% ; another may receive 25% and 
10%. Two or more discounts are called a discount series. Trade discounts should not be confused with 
cash discounts. A trade discount is deducted from the list or catalog price at the time the sale is made, the 
net amount being charged to the customer. A cash discount is a deduction made from the amount of the 
bill because of payment in cash being made by the customer in a certain number of days after the date of 
the bill. 

When two or more discounts are quoted, the first one is computed on the list or catalog price ; the second 
on the remainder after deducting the first, and so on. 

Example: A bill of electrical goods per catalog price is $490.80, subject to a discount of 10% and 5%. 
What was the net amount of the bill? 

Solution : $490.80 
10% off 49.08 



$441.72 
5% off 22.09 



$419.63 = the net amount of the bill. 

The equivalent of a series of discounts may be found as follows : 

Example: Find a single rate of discount equivalent to a discount series of 10% and 5%. 

[20] 



Solution : Let 100% represent the list price. Then 90% equals the list price after the first discount has 
been subtracted. 5% of 90% equals 4y 2 %, which subtracted from 90%, gives 85y 2 %. l00%—85y 2 %= 
14^%, the single discount required. 

1. Which is the better for the buyer and how much, a single discount of 50% or a discount series of 40%, 
10% and 5%? 

2. Goods were sold subject to trade discounts of 20%, and 10%. If the total discounts allowed amounted 
to $91, what was the list price? 

3. Find the net selling price of an article listed at $630.00 subject to trade discounts of 33 1/3%, 10%, 
and 5%. 

INTEREST 

Interest is compensation for the use of money and is computed at a certain per cent of the sum borrowed. 

In business 12 months of 30 days each or 360 days are considered one year. This is not exact but it is 
used because convenient and lends itself readily to the decimal system of computing interest. 

COMPUTATION OF TIME: The Negotiable Instrument Law provides that where a note or draft is 
payable a fixed number of days after date or sight, the date of the instrument is excluded and the day of 
payment is included in the computation of time. Thus in finding the date of maturity of a note dated 
April 10, payable in 10 days, April 11 is the first day counted and April 20 the last day. If a note falls due 
on Saturday, which is a half holiday, and is paid on the Monday following, two days' interest are added. 

Otherwise than in the above case there seems to be no universal method of calculating time. The Months 
and Days Method and the Exact number of Days Method are used according to the whim of the individual 
making the calculation, or according to the custom of a particular office or line of business. 

MONTHS AND DAYS METHOD 

Example: Find the time from April 8, 1917, to October 1, 1917. 

Solution : From April to May 8 is one month ; to June 8, two months ; to July 8, three months ; to August 
8, four months ; to September 8, five months. There are 22 days remaining in September and one in October, 
making 23 days which added to the months previously found, give the time as five months twenty-three days. 

Find the time in months and days from 

1. June 25, 1916, to June 1, 1917. 

2. October 15, 1916, to December 31, 1916. 

3. January 21, 1918, to September 30, 1918. 

4. February 2, 1918, to October 1, 1918. 

EXACT NUMBER OF DAYS METHOD 

Example: Find the time from April 8, 1917, to October 1, 1917. 

Solution: number of days remaining in April, 22 

number of days in May, 31 

" M " June, 30 

" " " July, 31 

" " " August, 31 

" " H September, 30 

" " r October, 1 



Total 176 days 

Find the time in exact number of days from 

1. July 5, 1917, to December 29, 1917. 

2. May 2, 1917, to August 3, 1918. 

3. September 30, 1917, to November 30, 1917. 

4. January 1, 1918, to October 1, 1918. 

[21] 



COMPUTING INTEREST 

There are two general methods of calculating interest, the Government or Accurate Method and the 
Decimal Method. There are variations of the decimal method but they all arrive at the same result. 

THE DECIMAL SYSTEM 

THE DECIMAL SYSTEM OF COMPUTING INTEREST used in ordinary business transactions is 
based upon the fact that the interest on one dollar at 6% for 16 2/3 years will equal one dollar. In other 
words, any sum drawing interest at 6% will in 16 2/3 years (200 months) gain a sum equal to itself. Then 
the interest for 20 months (1/10 of 200 months) will equal 1/10 of the principal. The interest for two months 
will equal 1/100 of the principal, and the interest for 6 days (1/10 of two months) will equal 1/1,000 of the 
principal. 360 days to the year are used with this method. 

Example: Find the interest on $1,250 for 3 months, 18 days at 6%. 

Solution: Moving the decimal point in the principal two places to the left gives $12.50 as the interest 
for two months. One-half of $12.50 or $6.25 equals the interest for one month. Moving the decimal point 
in the principal three places to the left gives the interest for six days which is $1.25. 

To arrive at the interest for 18 days we multiply $1.25 by 3 which gives $3.75 as the interest for 18 days. 

The solution may be placed in a concise form as follows : 
$1,250 = Principal 



$12.50 = Interest for two months 
6.25 — Interest for one month 
3.75 = Interest for 18 days 



$22.50 = Interest for three months, eighteen days. 

IN COMPUTING RATES OTHER THAN 6%, find 6% first, then add or subtract as the case requires. 
If 5% is wanted compute interest at 6% and divide by 6, giving 1 %. Subtract the 1% from the 6%. If 
7% is called for, divide as before and add the result to the 6%. If 4^% is required, divide 6% by 4 which 
gives \y 2 %. Subtract the \y 2 % from 6% and the result is 4y 2 %. 

In the following examples find the exact number of days between the dates given and reduce to months 
and days, allowing 30 days to a month, 360 days per year, and compute interest by the decimal method. 

Time Rate 

January 1, 1918, to February 5, 1918 6% 

May 9, 1918, to June 30, 1918 5% 

November 20, 1917, to February 2, 1918 6% 

December 15, 1917, to March 8, 1918 3% 

January 3, 1918, to March 10, 1918 4y 2 % 

A variation of this method is to point off three places in the principal, multiply by the number of days and 
divide by 6. 

Compute interest on the following amounts for the time mentioned, using the months and days method 
of findng time, 360 days to the year. 

25, 1918, to December 31, 1918 7% 

1, 1918, to May 6, 1918 8% 

1, 1918, to February 24, 1918 6% 

20, 1918, to June 15, 1918 4% 

1, 1918, to Septembers, 1918 5% 
[22] 





Principal 


1. 


$3,000.00 


2. 


2,948.60 


3. 


7,269.75 


4. 


4,375.90 


5. 


6,429.40 



1. 


$2,864.32 


October 


2. 


2,000.00 


February 


3. 


5,520.80 


February 


4. 


8,143.70 


March 


5. 


9,486.00 


June 



ACCURATE INTEREST 

In all transactions involving the computation of interest the U. S. Government uses the actual number of 
days, 365 days to the year. 

ACCURATE INTEREST METHOD. To find the accurate interest for an exact number of days, com- 
pute the interest on the amount for one year at the given rate, divide this result by 365 to obtain the inter- 
est for one day and multiply the quotient by the required number of days. An easier working method, 
however, is to multiply the interest of one year by the number of days required and divide by 365, thus 
reversing the order of the multiplication and division. Example: Find the accurate interest of $1,350.68 
from May 10, 1917, to September 5, 1917, at 5%. The number of days is found as follows: 



May, 


21 days 


June, 


30 days 


J«iy, 


31 days 


August, 


31 days 


September, 


5 days 



118 days 

The interest on $1,350.68 for one year at 5% is $67,534. The problem may now be expressed in this 
manner : 

67.534 X 118 



1 365 



$67,534 the interest for one year multiplied by 118, the number of days ss $7,969,012. Dividing the last 
product by 365 gives $21.83, the answer desired. 

Find the accurate interest on the following amounts for the time and rate mentioned. 

Principal Time Rate 

1. $1,892.50 January 1, 1917, to May 2, 1917 Sy 2 % 

2. 32,876.40 March 1, 1917, to December 4, 1917 6% 

3. 10,743.60 October 16, 1917, to November 13, 1917 7% 

4. 2,594.16 April 1, 1917, to January 3, 1918 6% 

5. 14,641.20 Nov. 29, 1917, to April 3, 1918 4^% 

BANK DISCOUNT 

There is no standard method of computing time and interest used by banks in discounting notes except 
as provided by the Negotiable Instrument Law in reckoning time on notes and drafts payable in a certain 
number of days. There is a tendency, however, towards the use of accurate interest. 

In the following examples first find the date of maturity of the note by counting the time as expressed in 
the note, forward from the date of the note ; then find the time in exact number of days between the date 
the note was discounted and the date of maturity. Reduce this time to months and days and compute the 
discount for that time, decimal method 30 days to a month, on the amount due at maturity. If the note 
is not interest bearing, the discount is reckoned on the amount of the note. If the note bears interest the 
discount will be figured on the amount of the note plus the interest on that amount for exact number of 
days from the date of the note until the date of maturity. 

Example: Note of Blish & Co. for $6,475 at 60 days, dated October 7, 1917, discounted October 15, 1917, 
at 6%. 

Solution: Counting 60 days forward from the date of the note gives December 6, 1917, as the date of 
maturity. 

[23] 



From October 15, the day of discount, to December 6, the day of maturity, the time is 52 days or 1 
month, 22 days. 

$6,475 == Principal 



$32,375 = Interest for one month 
21.583 = Interest for twenty days 
2.158 = Interest for two days 



$56,116 = Answer. 

The above answer should be read $56.12 as five mills or more in a final result are considered as one cent. 

Example: Sampson & Snow's note at three months date October 12, 1917, bearing interest at 5%, 
discounted October 15, 1917. 

Solution : Note due January 12, 1918. October 12 to January 12 = 92 days = 3 months, 2 days. 

Interest 3 months, 2 days, at 5% on $4,250 = $54.31 which added to $4,250 = $4,304.31. 

The time from October 15 (date of discount) to January 12 (date of maturity) is 89 days = 2 months, 
29 days. Discount rate 6%. 

$4,304.31 = Amount due at maturity 



43.043 = Interest for 2 months 
21.521 = Interest for 1 month 



64.564 

.717 = Less interest for 1 day 



$63.85 — Discount on Sampson & Snow's note. 

The discount rate is commonly 6% but any other rate may be agreed upon. 

For convenience in computing interest, banks usually disregard a fraction of a dollar less than 50 cents ; 
but if the fraction is 50 or more cents it is considered as another dollar. In this work, however, the exact 
amount will be used. 



1. 
2. 
3. 
4. 
5. 
6. 
7. 
8. 
9. 
10. 



Find the discount on the 
Face of Note 
$3,400.00 



1,625.00 
4,617.80 
2,914.20 
2,914.20 
7,218.90 
6,429.40 
1,627.64 
1,250.00 
1,872.40 



following notes : 
Date 
January 25 
February 1 
March 10 
October 1 
October 1 
May 3 

June 16 

September 1 
October 3 
October 29 



Time 

3 months 
60 days 
90 days 
60 days 
60 days 

4 months 
30 days 

2 months 

3 months 
60 days 



Discounted 


Interest 


January 


28 


6% 


February 


1 




March 


12 




October 


4 


5% 


October 


4 




May 


4 


4% 


June 


17 




September 


1 




October 


5 


6% 


October 


30 





Find the discount on the following drafts: 

(The date of maturity is found by adding the time to the date of acceptance.) 

Amount Time after sight Accepted Discounted 

1- $2,524.20 30 days June 10, 1918 June 11, 1918 

2. 1,640.35 60 days June 14, 1918 June 17, 1918 

3. 3,429.60 90 days July 1, 1918 July 2, 1918 

(Falls due on Sunday and is paid on Monday following) 

4. 672.90 60 days July 5, 1918 July 6, 1918 

5. 4,261.75 30 days May 9, 1918 May 11, 1918 

[24] 



To find the amount for which a note to be discounted should be written in order to borrow a certain sum : 
Divide the amount to be borrowed by the net proceeds of one dollar for the given rate and time. 
You have your note at 3 months discounted at a bank and realize $5,000. The discount rate being 6%, 
what is the amount of the note? 

Solution : 

$1.00 less interest for three months at 6% =.985 

$5076.14 



.985)5000.00000 
4925 



7500 
6895 

6050 
5910 

1400 
985 

4150 
3940 

210 

Answer : Amount of note, $5,076.14. 

Proof : $5,076.14 less interest for three months at 6% =$5,000. 



[25] 



EXERCISE NO. 102 
Journalize the following transactions: 

October 1, 1915. 
S. W. Beaman, one of your customers, returns goods to you which arrived damaged $45.85. 

October 2. 
You receive a note of $275.00 from Martin & Co. which you immediately transfer to J. A. Curry. 

October 3. 
You return goods to Maynard & Warner which were not up to sample exhibited, $38.60. 

October 4. 
Purchase Discount was debited $125.60 instead of Sales Discount. Correct the error. 

October 5. 

You took up your note of $450.00 to E. W. Lane by giving him merchandise $300 and a new note at 60 
days for the balance. 

October 6. 

The Wilton Woolen Company has called our attention to an error in our bill of October 3rd in which we 
charged them $1.75 each for one dozen Stilson wrenches. We had previously quoted the price as $1.25 each. 
Make entry to correct error. 

October 7. 

J. H. Roberts gives us on account Jones & Co.'s note for $600 at three months dated September 25. We 
allow Roberts the present worth of the note, $592.10. 

October 8. 

On merchandise previously sold and charged to Jones & Co. you have agreed to pay freight. You did not 
prepay it and Jones & Co. notify you that they have paid freight, $5.10. 

October 9. 
We buy merchandise of Soames & Smith $2,000, giving in payment our note at two months. 

October 10. 

The Derby Desk Company allow us a rebate of $10 on an office desk which has been credited to the Derby 
Desk Co. but has not been paid for. 



[26] 



EXERCISE NO. 103 
C. W. Cutter 

Trial Balance, June 30, 1918. 

Cash $729.68 

Accounts Receivable 5,586.20 

Notes Receivable 480.00 

Inventory, December 31, 1917 (cost) 3,186.25 

Delivery Equipment 650.00 

Furniture and Fixtures 775.00 

Accounts Payable $2,075.80 

C. W. Cutter, Capital 8,050.00 

Purchases 15,142.60 

Purchase Returns 210.60 

Purchase Discounts 165.00 

Sales 21,578.75 

Sale Returns 429.42 

Selling Expense 3,188.00 

General Administrative Expense 1,800.00 

Loss on Bad Accounts 125.00 

Interest 12.00 



$32,092.15 $32,092.15 
Merchandise Inventory, June 30, 1918 — $3,360.95 (cost) 

Required: 

(a) Working sheet. 

(b) Balance sheet. 

(c) Closing entries. 

(d) Find per cent of cost of doing business to net sales. 

(e) Find per cent of net profit to net sales, 
(f ) Find rate of turnover. 

N. B. Do not abbreviate on balance sheets and profit and loss statements. Do not forget punctuation. 



[27] 



QUIZ QUESTIONS IN ACCOUNTING TECHNIQUE 
FRESHMAN CLASS 

1. What is a post mark ? 

2. Where is a post mark placed? 

3. What does it indicate? 

4. When should it be made? 

5. What is a journal ? 

6. What is a ledger ? 

7. What is the balance of an account? 

8. Give a rule for debiting and crediting accounts. 

9. Into what account are the accounts which affect proprietorship closed at the end of the accounting period ? 

10. Into what account is the profit and loss account closed? 

11. Do business earnings appear as a debit or a credit in income or revenue accounts? 

12. Define expense. 

13. To which side of the expense account are expenses posted? 

14. What becomes of these expenses at the end of the business period when the expense account is closed? 

15. May there be more than one expense account? 

16. Give the names of several expense accounts. 

17. What is the balance of the profit and loss account called? 

18. What is an account receivable? 

19. What is an account payable ? 

20. What is debited to a notes receivable account ? 

21. What is credited to a notes receivable account? 

22. Of what does the balance of the notes receivable account consist and is it an asset or a liability? 

23. What is debited to a personal account ? 

24. What is credited to a personal account ? 

25. When is the balance of a personal account an asset? 

26. When is the balance of a personal account a liability? 

27. What is posted to the sales account? 

28. Is the balance of the sales account an asset or a liability? 

29. What is posted to the purchases account ? 

30. What is interest? 

31. What is discount ? 

32. What is posted to an interest account ? 

33. Is a credit balance of an interest account an asset, liability, expense or income ? 

34. What is a trial balance? 

35. Does the trial balance prove the accuracy of the accounts? 

36. What does the trial balance prove ? 

37. If your trial balance were wrong how would you know it and how would you proceed to find the error? 

38. Why do business concerns commonly use more than one book of original entry? 

39. What word is used to designate all kinds of things that have value to a business? 

40. What is a liability? 

41. Into what classes are assets divided on the balance sheet? 

42. Define the different classes of assets on a balance sheet. 

43. Define the different classes of liabilities on a balance sheet. 

44. Name the three divisions or parts of a balance sheet. 



[28] 



EXERCISE NO. 104 

J. B. McLean's Trial Balance, September 30, 1918. (After Adjusting) 

Real Estate $25,000.00 

Store Fixtures 4,250.00 

Reserve for Depreciation of Store Fixtures $600.00 

Motor Trucks 2,850.00 

Reserve for Depreciation 412.50 

Office Equipment 1,850.00 

Reserve for Depreciation of Office Equipment 140.00 

Cash 2,1 50.48 

Accounts Receivable 27,725.82 

Reserve for Loss on Bad Accounts 514.50 

Notes Receivable 325.00 

Merchandise Inventory, June 30, 1918 12,428.50 

Sales 48,103.48 

Sale Returns 1,740.60 

Purchases 33,460.20 

Purchase Returns 2,450.10 

Freight In 385.90 

Mortgage Payable 10,000.00 

Accounts Payable 17,920.80 

J. B. McLean, Capital 43,000.00 

J. B. McLean, Personal 600.00 

Selling Expense 6,363.54 

General Administrative Expense 2,840.00 

Discounts on Purchases 1,338.40 

Delivery Expense 818.00 

Discount on Sales 969.44 

Insurance Unexpired 35.60 

Garage Supplies on Hand 22.20 

Loss on Bad Accounts 514.50 

Interest 150.00 

$124,479.78 $124,479.78 

Merchandise Inventory, September 30, 1918, $14,260.28. 

Required: 

(a) Working sheet. 

(b) Profit and loss statement. 

(c) Closing entries. 

The above trial balance was taken after the adjusting entries were made and posted. The student there- 
fore will make only the usual closing journal entries. 

Mr. McLean wishes you to close the net profit or net loss into his personal account and the resulting 
balance of the personal account into his capital account. 



129] 



TYPICAL ADJUSTING ENTRIES 

Adjusting Journal entries should be explained in such a manner that the essential points of the adjustment 
may be understood by one not familiar with the transaction and the data furnished should be of such a char- 
acter that the amount of the entry can be computed therefrom. 

Loss on Bad Accounts $1,052.90 

Reserve for Loss on Bad Accounts $1,052.90 

To adjust the Reserve account to agree with 1% of the net sales: 

1% of net sales $1,146.90 

Balance of Reserve account 94.00 

Amount necessary to adjust $1,052.90 

Depreciation of Store Equipment 79.00 

Reserve for Depreciation of Store Equipment 79.00 

General Office Expense 37.50 

Reserve for Depreciation of Office Equipment 37.50 

Estimated depreciation of above equipment for year ending 12-31-16: 

Figured on cost of store equipment $790.00 

and office equipment 375.00 

at the rate of 10% per annum 

Advance Advertising 500.00 

Advertising 500.00 

To set up as an asset y$ of the advertising already paid for, it being esti- 
mated that this proportion influences the sales of the next fiscal period. 

Taxes on Stock 82.50 

Taxes Accrued 82.50 

Accrued taxes April 1-June 30=3 mos, calculated on basis of rate last 
year, $16.50 per thousand on $20,000. One year $330-^4=3 mos., $82.50 

Interest on Mortgage Payable 104.17 

Interest Accrued on Mortgage Payable 104.17 

Interest accrued on mortgage payable of $25,000 from 5-31-16 to 6-30-16 
=1 month at 5%=$104.17 as above. 

Delivery Expense 520.00 

Reserve for Depreciation of Motor Trucks 520.00 

To provide for depreciation of motor trucks at the rate of 20% per annum 
on equipment costing $2,600. 

Interest on Notes and Loans Payable 208.33 

Interest Accrued on Notes Payable 208.33 

Interest accrued on Note of $50,000 to First National Bank, interest 5%, 
from 5-31-16 to 6-30-16=30 days=$208.33. 

Inward Freight 732.00 

Outward Freight 1,098.00 

Delivery Expense 1,830.00 

To distribute Delivery Expense on the basis of 40% to Inward Freight 
and 60% to Outward Freight. 

It is not well to attempt to apply the principles of debit and credit to closing and adjusting entries as such 
entries do not represent business transactions and are made for the purpose of computing the results of the 
business period. 

[30] 



EXERCISE NO. 105 

Charles B. Annis, Trial Balance December 31, 1918 

Land and Buildings $10,000.00 

Tools and Implements 750.00 

Horse and Wagon 300.00 

Furniture and Fixtures 100.00 

Cash . 893.45 

Accounts Receivable 3,480.90 

Notes Receivable 200.00 

Inventory June 30, 1918 8,241.65 

Mortgage Payable $3,000.00 

Accounts Payable 2,480.50 

Notes Payable 300.00 

Charles B. Annis, Capital 14,813.74 

Charles B. Annis, Drawings 750.00 

Purchases 12,460.75 

Purchase Returns 250.00 

Sales 23,370.71 

Sale Returns 1,740.80 

Freight Inward 468.00 

Purchase Discount 629.50 

Interest 180.00 

Selling Expense 4,480.60 

Administrative Expense 349.00 

Loss on Bad Accounts 449.30 

$44,844.45 $44,844.45 



Inventory December 31, 1918 $7,260.55 

Required: 

(a) Working sheet. 

(b) Profit and loss Statement. 

(c) Balance sheet. 

(d) Closing entries. 

Place the fixed assets first on the balance sheet. 



[31J 



EXERCISE NO. 106 
T. B. Witherspoon 

Trial Balance June 30, 1917 (After Adjusting) 

Cash $1,197.00 

Customers' Accounts 12,295.60 

Bills Receivable . . . . ' 101.00 

Merchandise on Hand December 31, 1916 (Cost) 3,307.50 

Furniture and Fixtures (Cost) 1,250.00 

Horses and Wagons (Cost) 1,350.00 

Accounts Payable $9,649.70 

T. B. Witherspoon, Capital 10,605.63 

T. B. Witherspoon, Drawings 600.00 

Purchases 19,050.75 

Sales 24,242.80 

Interest 16.72 

Expenses 2,800.00 

Salaries 2,806.00 

Insurance Unexpired 25.00 

Loss on Bad Accounts 172.00 

Reserve for Depreciation of Furniture and Fixtures 162.50 

Reserve for Depreciation of Horses and Wagons 187.50 

Reserve for Loss on Bad Accounts 105.00 

Stable Expenses 300.00 

Cash Discounts on Purchases 285.00 



$45,254.85 $45,254.85 



Cost of merchandise on hand June 30, 1917 $2,560.75 

Required: 

(a) Profit and loss statement. 

(b) Balance sheet. 

(c) Closing entries. 

(d) Questions answered. 

1. What in your opinion is the cause of the trouble in the above business? 

2. If Mr. Witherspoon should apply to you for a loan of $2,000 to relieve his financial distress do you 
think it would be safe to do so? Give full reasons for your answer. 



[32] 



EXERCISE NO. 107 

Make entries in Journal form with full explanations for the following transactions : 

October 1, 1918 

The old books being closed, you desire to open a new set. Your balance sheet shows assets and liabilities 
as follows: Cash $642, Accounts Receivable $6,250, Notes Receivable $348.50, Merchandise on hand (cost) 
$3,260.75, Furniture and Fixtures $550, Horse and Wagon $350, Accounts Payable $4,128.60, Notes Pay- 
able $1,000. . 

Make entry to open new books. 

October 2. 

J. M. Johnson has failed owing you $368 and pays 50%. You receive from him the Boston Iron Com- 
pany's note for $184 in full settlement. Make entry for settlement. 

October 3. 
The First National Bank has discounted your note of this date at two months for $750 at 6%. 

October 4. 

The First National Bank has discounted Holmes and Company's note in your favor, face $3,275, time 60 
days at 6%. 

October 5. 

A note made by the Liverpool Bridge Co. for $1,260 at 90 days in your favor and which the First National 
Bank had discounted, the maker cannot pay. (1) You send a check to the bank to pay the note and the note 
thus obtained is handed back to the Liverpool Bridge Co. (2) In exchange the Bridge Co. gives you $500 
cash and a new note at 30 days for an amount which includes the balance due plus 30 days' interest. Make 
entries for Nos. 1 and 2. 

• October 6. 

You have received a note for $1,256.80 at 60 days made by John Baynes, one of your customers. The note 
is dated October 4, bears interest at 5% and is discounted October 6. Make entries for discounting the note 
at 6%. 

October 7. 

Haines & Co. credit you for goods returned $104. 

October 8. 

You accept a draft at 60 days sight drawn by the Edgeworth Pottery Co. in favor of the First National 
Bank, for $472. 

October 9. 
Received cash in payment of Sircom & Company's note $212. 

October 10. 

You receive from Simpson & Co. on account Silas Cohen's note in their favor dated October 1, at four 
months for $721.48, which they have transferred to you by indorsement. You credit Simpson & Co. for the 
present worth of the note. 



[33] 



EXERCISE NO. 108 
A. B. Martin 

Footing of Accounts, June 30, 1918 (After Adjusting) 

Dr. Cr. 

Cash $11,447.00 $10,250.00 

Customers' Accounts - . . . 14,756.40 12,460.80 

Bills Receivable 411.00 310.00 

Furniture and Fixtures 290.00 40.00 

Merchandise on hand December 31, 1917 (cost) 3,307.50 

Horse and Wagon (cost) 350.00 

Accounts Payable 8,142.60 8,792.30 

A. B. Martin, Capital 4,795.63 

A. B. Martin, Drawings 600.00 

Purchases 9,390.75 340.00 

Sales 305.60 14,548.40 

Interest 6.72 

Expenses 1 ,800.00 

Salaries 806.00 

Insurance Unexpired 25.00 

Loss on Bad Accounts 172.00 

Reserve for Depreciation of Furniture and Fixtures 40.00 102.50 

Reserve for Depreciation of Horse and Wagon 87.50 

Reserve for Loss on Bad Accounts 105.00 

Stable Expenses 180.00 

Cash Discounts on Purchases 185.00 

$52,023.85 $52,023.85 
Cost of Merchandise on hand June 30, 1918 $2,560.75 

Required: 

(a) Trial balance. 

(b) Profit and loss statement. 

(c) Balance sheet. 

(d) Closing entries on journal paper. 

(e) Answers to questions. 

1. Explain how you would account for the fact that loss on bad accounts shows a debit balance of $172, 
while reserve for loss on bad accounts has a credit balance of only $105. 

2. How do you account for the difference between the amount of sales and the amount charged to cus- 
tomers' accounts? 

3. Is the merchandise on hand December 31, 1917, an asset at the time of closing the books June 30, 
1918? Give reason for your answer. 

4. What expenses have been posted to the expense account? 

Mr. Martin instructs you to close his net profit and his drawings account into the capital account. 



[34] 



EXERCISE NO. 109 
G. C. Cole 

Trial Balance October 31, 1917 

Cash $4,672.04 

Accounts Receivable 7,569.05 

Notes Receivable 142.80 

Furniture and Fixtures 364.00 

Saxon & Company $122.50 

Lever Bros 1,023.80 

B. B. Pierce & Company 3,024.62 

Park & Tilford 2J218.14 

Notes Payable 350.00 

G. C. Cole, Capital 18,000.00 

Sales 41,270.60 

Sale Returns 178.00 

Inventory (January 1, 1917) 13,150.48 

Purchases 37,642.50 

Purchase Returns 1,183.60 

Cash Discount on Purchases 1,592.41 

Cash Discount on Sales 670.50 

Freight In 342.80 

Express Out 271.50 

Selling Expense 2,782.00 

General Administrative Expense 1,000.00 

$68,785.67 $68,785.67 
Merchandise inventory October 31, 1917 $15,480.75 

Required: 

(a) Ledger accounts (six accounts to a ledger page). 

(b) Profit and loss statement. 

(c) Balance sheet. 

(d) Closing entries. 

Open ledger accounts directly from the trial balance using "T. B." in the folio column. After the clos- 
ing entries are posted, rule off the accounts that balance in the ledger. 

The transactions given below form a continuation of the business conducted by G. C. Cole. The student 
should use a journal (two pages), cash book (two opposite pages), purchase book (one page), and a sales 
book (one page). On each page of the cash book rule two additional money columns making a four column 
cash book. Each of the extra columns should be one inch wide, 2/8 in. for the cents, 6/8 in. for the dollars. 
The money columns should be headed from left to right on the cash received page as follows : Accounts 
Receivable Cr., Sundry Credits, Discounts on Sales, Net Receipts ; on the cash payments page, Administrative 
Expense Debit, Sundry Debits, Discount on Purchases, Net Payments. 

Use ledger already made for a general ledger in which the account headed "Accounts Receivable" is 
a "controlling" account and contains a summary of all the accounts in the sales ledger. Prepare a sales 
ledger using one double sheet of ledger paper containing the following customers' accounts with balances 
as of November 1, 1917. Allow eight lines to each account. Number the pages of the general ledger 1-4 
and the pages of the sales ledger 5-7; also number the journal ruled pages consecutively. 



[35] 



Holden & Bliss $1,640.25 

Charles T. Johnson 1,420.67 

John B. Wise 2,241.08 

Ellison & Co 1,291.64 

C. A. Weed 250.00 

Foss & Daniels 725.41 



$7,569.05 



Notice that the sum of the above balances is the same as the balance of the Accounts Receivable account 
on the trial balance. 

Problem should be complete in every detail when passed in. Post marks, dates, ruling, explanations 
of journal entries, etc., must not be omitted. Technique, neatness, and arrangement will be considered in 
grading. Be sure that you understand the controlling account (Accounts Receivable) and the manner of 
posting to it. 

Required: 

(a) Make entries in appropriate book for the transactions given below. 

(b) Post into general and sales ledgers. 

(c) Make trial balance 

(d) Foot and rule books of original entry. 

November 1. 

G. C. Cole agrees to admit Samuel C. Locke as a partner in the business, the firm to be known as Cole 
and Locke. Locke on his part contributes to the capital of the concern an amount equal to one-half of the 
net worth of the business according to the balance sheet of October 31, as follows: 

A three months' note for $5,244.79 dated October 1, 1917, made by the Acme Fruit Co. and bearing 
interest at 7%. (Mr. Locke is to be credited for interest, one month — debit Interest Accrued) ; also a 
note for $5,469.41 at 20 days bearing interest at 6%, made by Locke, payable to Cole and Locke and 
dated November 1, 1917. It is also agreed that the profits shall be divided or the losses borne, in the same 
proportion as their capital investments. 

Journal entries must be fully explained 

November 2. 
Insured stock of merchandise in store for $12,000. Paid premium in cash $90. 

November 3. 
Sold Nelson & Stern Mdse. 2/15 N/60, $1,215. 

November 4. 
Accepted Lever Bros', draft at 20 days' sight $428. 

November 5. 
B. B. Pierce & Co. draw on us at 60 days' sight for $2,200. We paid it at once less discount for 60 days. 

November 6. 
Bought draft for $122.50 at J/2% exchange and remitted it to Saxon & Company in full. 

November 7. 
Sold to Soames & Phipps at 2/10 N/30 Mdse. $258.70. 

[36] 



November 8. 
Paid our acceptance of October 23 favor Milton & Co. $350. 

November 9. 
Gave Park & Til ford check in full less discount 3%. - 

November 12. 
Accepted B. B. Pierce & Company's draft favor of J. W. Edmunds dated November 8 at 30 days' sight 
in full $824.62. 

November 13. 

Bought of Tomasso DeVito Mdse. $3,250., terms 4/15 N/30. 

November 14. 
Received cash from Brimmer and Goldberg for their acceptance of October 15, $142.80. 

November 17. 
Received of Soames & Phipps cash for bill of November 7 less discount 2%. 

Drew on Holden & Bliss at 30 days' sight for $1,640.25 favor of ourselves, accepted 14th inst. Discounted 
the draft at National Security Bank this day. 

November 18. 
Received of Nelson & Stern cash for bill of November 3, less discount 2%. 

Accepted, payable at National Shawmut Bank, Lever Bros, draft for $250.80 at 20 days' sight, favor of 
themselves. 

Sold John B. Wise Mdse. $425.80, terms 2/10 N/30. 

November 19. 
Received of Ellison & Co. on account an accepted draft for $525 at 30 days drawn by the Bowery Bank of 
New York on the Fourth National Bank of Boston, in his favor and endorsed by him to Cole & Locke. 

November 20. 
Bought of B. B. Pierce & Co. Mdse. $1,066.50. Gave them in part payment the acceptance received from 
Ellison & Co. on the 19th inst. 

November 21. 
Mr. Locke paid his note of November 1 in cash with interest at 6%. 

November 22. 
Sold C. A. Weed at 10 days Mdse. $420.81. 

November 23. 
Paid T. DeVito for bill of November 13 less discount 4%. 
Prepaid our acceptance of the 12th inst., favor J. W. Edmunds less discount for 19 days. 

November 24. 
Paid our acceptance Lever Bros', draft of November 4. 

November 28. 
Received cash of J. B. Wise for bill of November 18, less discount 2%. 

November 29. 
Charles T. Johnson fails and pays 40%. Received cash from the assignees in full settlement. 

November 30. 

Discounted at National Shawmut Bank Acme Fruit Company's note received from S. O. Locke November 
1. Discount 6%. 

November 30. 

Messrs. Cole and Locke each withdrew cash $100 which is to be considered their salary as managers of the 
concern. 

[37] 



EXERCISE NO. 110 
J. C. Edison 

Trial Balance December 31, 1918 

Cash $2,545.00 

Accounts Receivable 10,163.75 

Notes Receivable 2,749.00 

Inventory, June 30, 1918 6,758.70 

Office Equipment 680.00 

Accounts Payable $2,198.50 

Notes Payable 2,041.00 

J. C. Edison, Capital 21,830.00 

Purchases (no returns) 24,560.00 

Interest on Notes Receivable 123.40 

Interest on Notes Payable 198.40 

General Administrative Expenses 2,168.25 

Selling Expense 4,690.00 

Sales 29,840.20 

Rent 600.00 

Cash Discounts on Sales 285.00 

Cash Discounts on Purchases 195.00 

Sales Returns and Allowances 830.00 

$56,228.10 $56,228.10 

Inventory, December 31, 1918 $9,200.00 

The Notes Receivable balance consists of two notes: one for $2,000, dated November 15, 1918, at 3 months, 
bears 7% interest and one for $749, dated November 1, 1918, at 4 months which bears Ay 2 % interest. 

The Notes Payable balance consists of two notes: one for $1,541, dated October 28, 1918, at 6 months, 
interest at 4^%, and one for $500 dated December 1, 1918, at two months. 

Depreciation on office equipment 10% per annum. » 

Reserve 1^% of the balance due from trade debtors to cover the amount which is estimated will be de- 
ducted by customers when paying the balances they owe as of December 31, 1918. 

Required: 

(a) Working sheet with four additional columns for Adjustments and Adjusted Trial Balance. 

(b) Adjusting and closing entries. 

Comments: 

Mr. Edison's drawings have been charged to General Administrative Expenses. 

All disbursements for freight and hauling inward have been charged to Purchases. 

The goods on hand at the beginning and end of the period under review were valued at invoice prices. 



[38] 



EXERCISE NO. Ill 
Samuel Goldman 

Trial Balance, December 31, 1918 

Furniture and Fixtures $1,200.00 

Cash 875.00 

Notes Receivable 250.00 

Accounts Receivable 8,890.00 

Inventory, December 31, 1917 5,678.90 

Mortgage Payable (On Furniture and Fixtures) $500.00 

Accounts Payable 1,890.60 

Notes Payable 720.50 

Samuel Goldman, Capital 8,100.00 

Purchases : 9,021.00 

Purchase Returns 189.65 

Purchase Discount 208.42 

Freight Inward 367.90 

Sales 17,852.04 

Sale Returns 260.41 

Selling Expense 1,860.00 

General Administrative Expense 1,028.00 

Interest 30.00 

$29,461.21 $29,461.21 
Inventory December 31, 1918 $4,145.29 



Required: 

(a) Working sheet. 

(b) Balance sheet (fixed assets first). 

(c) Closing entries. 

(d) Answer questions. 

The mortgage payable is a fixed liability. 

Mr. Goldman wishes you to credit his Capital account for net profit sufficient to increase his investment to 
$10,000, the balance of the net profit to be credited to an account entitled "Samuel Goldman, Current." 

1. Does the amount of accounts receivable as compared with the sales indicate that collections were slow 
or normal? 

2. Give percentage of cost of doing business (operating expenses plus other charges minus other income) 
to net sales. 

3. Give percentage of gross profit on sales to sales. 

4. Has Mr. Goldman withdrawn anything from the business for personal use? If so, to what account 
was it charged? 



[39] 



EXERCISE 112 
A. C. Walker 

Trial Balance September 30, 1918 (before adjusting) 

Office Equipment $950.00 

Store Equipment 3,200.00 

Cash 2,125.92 

Accounts Receivable 20,080.55 

Merchandise Inventory March 31, 1918 18,441.62 

Accounts Payable $6,498.58 

A. C. Walker, Capital 40,000.00 

A. C. Walker, Drawing 1,500.00 

Purchases 102,580.91 

Purchase Returns 1,719.67 

Sales 148,471.18 

Sale Returns 12,180.60 

Selling Expense 32,210.50 

Administrative Expense 2,165.24 

Express 1,254.09 

$196,689.43 $196,689.43 
Merchandise on hand September 30, 1918 $19,250.33 

1 and 2. The business has been in operation one year and instead of setting up reserve accounts the 
bookkeeper credited office equipment $50 and store equipment $168 at the time the books were closed 
(March 31, 1918). It is now desired to open reserve accounts and to adjust the balances of the equipment 
accounts to show cost. 

3 and 4. Add to the reserve accounts 5% of the cost of equipment to cover depreciation for the current 
period. 

5. It is estimated that $500 of the accounts receivable are uncollectable. 

6. Mr. Walker wishes his drawings charged to administrative expense and the drawing account closed. 

7. The inward express charges amount to $313.52. Transfer this amount to purchases. 

Required: 

(a) Working sheet (10 columns). 

(b) Adjusting and closing entries. 

(c) Profit and loss statement. 

(d) Why is not this business more prosperous? 

Examine the two statements and find reason. 



[40] 



EXERCISE NO. 113 

1. November 13, 1917, you have three bills on which you are entitled to discount if paid at once — one 
for $1,375.50, 3%, another for $647.35, 2%, and a third for $1,733.65, V/ 2 %. You have a note on hand for 
$4,175 at 60 days dated November 1, 1917, which you have discounted and with the proceeds pay the bills 
less the discount. How much did you save by the operation? (Value 20) 

2. If the note in question No. 1 had been payable with interest at 6% what would have been 

(a) The net proceeds of the note, and 

(b) The amount of cash left after paying the bills and taking advantage of the discount? (Value 10 

3. A check for $238.08 is remitted to pay a bill on which there is a discount of 4%. What was the amount 
of the bill? (Value 5) 

4. You purchase goods amounting to $500 on 60 days' credit and can secure a discount of 2% by paying 
the bill at once. You borrow the money from a bank by having your note at 60 days discounted and with 
the net proceeds you pay the bill. How much did you borrow and what was the amount of the note? . 

(Value 10) 

5. On closing your books December 31, 1917, you have on hand three interest-bearing notes as follows: 

$2,025, at 3 months, dated December 1, 1917, at 5%. 
$10,250, at 2 months, dated December 15, 1917, at 4y 2 %. 
$3,410, at 30 days, dated December 10, 1917, at 6%. 
Compute interest accrued at date of closing and make journal entry therefor. (Value 10) 

6. The bank discounts your note for $1,540.60, date January 7, 1918, at 60 days, bearing interest at 6% 
and discounted January 9. 

(a) What amount is due at maturity? 

(b) What is the discount time? 

(c) What is the discount? 

(d) What sum is realized upon the note? (Value 10) 

7. J. T. Connell gave you a note for $1,175.90 dated February 10 at 2 months which you had discounted 
February 11. 

(a) What amount is due at maturity? 

(b) What is the discount time? 

(c) What is the discount? 

(d) What sum is realized upon the note? (Value 10) 

8. A. W. Blake gives you a note at 90 days for $287.50, dated November 1, which you had discounted 
November 2. Make journal entry for the note discounted. (Value 10) 

9. Problem No. 35 from the Massachusetts C. P. A. Examination in Practical Accounting October 13, 
1916. 

The net profit of a business May 1, 1914, $8,905.82; Inventory December, 1911, $3,137.24; Purchases 
$110,831.64; Sales $163,376.08; Factory Labor $38,999.16; Factory Expenses $6,403.94; Repairs $32.00; 
Telephone $832.12; Insurance $392.46; Advertising $28.00; Commissions Paid $1,922.02; Interest Paid 
$626.00; Legal Expenses $35.00; drawn out by proprietor $3496.00. 

From the foregoing information ascertain Merchandise Inventory on May 1, 1914. (Value 15) 



[41] 



EXERCISE NO, 114 

George W. Moody's Trial Balance September 30, 1918 (Before Adjusting) 

Real Estate $25,000.00 

Store Fixtures 4,250.00 

Reserve for Store Fixtures $600.00 

Motor Truck 2,850.00 

Reserve for Motor Truck 412.50 

Office Equipment 1,850.00 

Reserve for Office Equipment 140.00 

Cash 2,200.48 

Accounts Receivable 27,266.49 

Notes Receivable 325.00 

Merchandise Inventory, March 31, 1918 12,428.50 

Mortgage Payable 10,000.00 

Accounts Payable 17,920.80 

G. W. Moody, Capital 43,000.00 

G. W. Moody, Personal 600.00 

Sales 48,103.48 

Sale Returns 1,740.60 

Purchases .' 33,460.20 

Purchase Returns 2,450.10 

Freight In 385.90 

Selling Expense 6,363.54 

General Administrative Expense 2,840.00 

Discounts on Purchases 1,338.40 

Delivery Expense 818.00 

Discounts on Sales 969.44 

Insurance Unexpired 35.60 

Garage Supplies 122.20 

Rent Expense 550.00 

Rent Income 550.00 

Maintenance of Real Estate 459.33 

$124,515.28 $124,515.28 
Merchandise Inventory, September 30, 1918 $14,260.28 

Required: 

(a) Working sheet. 

(b) Make journal entries to place the following adjustments on the books: 

1. The building included in the Real Estate account cost $20,000 and was finished and occupied August 
1, 1918. Compute depreciation at the rate of two per cent per annum. 

2. Estimated depreciation of motor truck for this year 25%. 

3. Estimated depreciation of office equipment 10% per annum. 

4. Estimated depreciation of store fixtures 10% per annum. 

5. An I O U for $50, which has been carried as cash for the past two months is considered worthless. 

6. Close Garage Supplies into Delivery Expense. 

7. It is estimated that the motor truck has been used to haul goods from the freight depot to the store 
about one quarter of the time (Debit "Hauling Inward"). 

8. The Mortgage Payable is dated August 1, 1918, interest payable semi-annually at 6%. Place on the 
books the interest accrued. 

[42] 



9. Close Maintenance of Real Estate into Rent Income. 

10. Distribute the rent expense 25% to General Administrative Expense and 75% to Selling Expense. 

11. Provide for loss on uncollectable accounts by reserving an amount equal to one quarter of 1% of 
the net sales as of September 30. 

Some of the above adjustments are permanent, while others may be reversed at the beginning of the new 
period. Designate, by checking, the adjusting entries that may be reversed. 

Comments: 

Observe that although Mr. Moody owns the building in which he does business, he charges Rent Expense 
and credits Rent Income for a fair rental. This procedure does not affect the net profit but it increases the 
operating expenses to cover the use of the building. 



[431 



EXERCISE NO. 115 
PARTNERSHIP PROBLEMS 

No. 1. A, B, and C are partners under an agreement to invest $20,000 each. Excess contributions are to 
draw interest and deficits are to be charged interest at 6%. A invests $15,000; B, $20,000; and C, $25,000. 

It is also agreed that all drawings in excess of salary shall be charged interest at 6%. The drawings in 
excess of salary were as follows : 



A— $300 


March 29, 


1917 


300 


Oct. 20, 


1917 


100 


Dec. 31, 


1917 



B— $150 


April 1, 


1917 


300 


July 10, 


1917 


100 


Dec. 10, 


1917 



The books are closed December 31, 1917, business period one year. Compute interest due to or from each 
partner. (Actual number of days, 30 days to a month, decimal method.) 



No. 2. 



A — Capital 



B — Capital 



Jan. 1, $18,000 



Jan. 1, $16,000 



A — Personal 
Feb. 1, $175 Jan.l, $100 
April 1, 100 
June 1, 200 

B — Personal 
Mar. 1, $160 
May 1, 150 
June 1, 100 



The above accounts show the investments and drawings of A and B. The net profit $6,800 is to be 
divided according to the average investment. Books closed June 30. Make journal entries disposing of the 
net profit between the partners. (Kester, page 281.) 

No. 3. The firm of Atwood and Smith enter into an agreement with Robert Brewer whereby Mr. Brewer 
is to acquire by purchase one-half of the business for $150,000. Mr. Brewer has turned over 650 shares of 
the Northeastern R. R. stock now selling at $92 per share and pays the balance of the $150,000 in cash. 
The agreement provides that the assets and liabilities of Atwood and Smith are to be taken over at their book 
value and that the good will of the business is valued at $40,000. Atwood's net investment is $70,000 and 
Smith's net investment is $40,000. According to the original agreement, the profits or losses are to be shared 
in the proportion of five-eighths to Atwood and three-eighths to Smith. 

Make journal entry or entries to bring on to the books the railroad stock, cash, good will and capital 
account of the new partner. 

No. 4. January 1, 1918, Messrs. Haines and Ditson have agreed to sell one-third of their business to Paul 
M. Foss. Foss has turned over to Haines and Ditson a note for $40,000 made by the Thorp Mfg. Co. in his 
favor, dated December 21 at three months and bearing interest at seven per cent ; also a note made by 
Hayden & Morse payable to Foss for $20,000, dated January 1, 1918 and payable in 60 days. Foss is to re- 
ceive credit for the accrued interest and pays the balance in cash $10,000. According to a balance sheet 
dated December 31, 1917, Haines net investment was $60,171.10 and Ditson's was $60,000. 

Make Journal entry or entries to place the good will on the books and to open Foss' Capital account. Credit 
Foss for the accrued interest. Haines and Ditson share equally in the gains or losses. 



[44] 



EXERCISE NO. 116 
PARTNERSHIP PROBLEMS 
Write the answer to each question distinctly and separated from the work. 

1. "When interest is not allowed on partners' capital the investments being equal and the profits shared 
unequally, that partner loses who is entitled to the smaller share of the profits." 

Prove the above statement by (a) showing accounts with the partners when interest is not allowed and (b) 
showing the partners' accounts when interest is allowed at 6% ; also indicate which partner has lost and how 
much. Use the following figures in your demonstration: 

A and B invest $20,000 each. The business period is one year. Without allowing interest the net profit is 
$9,000, 2/3 of which goes to A and 1/3 to B. 

2. In the same manner as in No. 1 demonstrate that when interest is not allowed, the partners' investments 
being unequal and profits shared equally, that partner loses who has the larger investment. 

A's investment $25,000. 

B's investment $15,000. 

Profits shared equally. 

Net profit without allowing interest $9,000. 

3. It follows that when interest is not allowed the only circumstances under which neither partner would 
lose would be in the case of profits being shared in proportion to investments with proportionate drawings 
made at the same time. Demonstrate the above statement using the following information : 

A's investment $12,000.00. 

B's investment $8,000.00. 

A draws $600 and B draws $400, on the same date, six months before the closing of the books. 

Net profit $3,000 (without interest) to be shared in the same proportion as their investments. 

Show partners' accounts both with and without interest. 



4. 



C — Capital 



C — Personal 



Dr. 



D — Capital 



Dr. 
Apr. 1, $2,000 



Cr. 


Dr. 




Jan. 1, $25,000 


Feb. 28, 


$250 


Mar. 1, 3,000 


Mar. 31, 


150 




May 31, 


200 


Cr. 


Dr. 




Jan. 1, $26,000 


Feb. 28, 


$300 




Apr. 30, 


200 




May 31, 


100 




June 30, 


50 



Cr. 



D — Personal 



Cr. 



Business period six months ending June 30. 

Net profit $7,800. 

Find each partner's average investment (Use month-dollars method). 

Divide the net profit between the partners according to the average investments. 

5. January 1, 1918, the firm of Harper and Johnson feeling the need of more capital in their business 
have entered into an agreement with H. B. Ballard whereby Mr. Ballard is to acquire by purchase a one- 
half interest in the business for $75,000, his contribution to constitute one-half of the capital of the new 
concern. Mr. Ballard has turned over to Messrs. Harper & Johnson cash $35,000 and four notes of 
$10,000 each in his favor. The notes bear interest at 7%, are dated Jan. 1, 1918, and mature in 2, 4, 6, 
and 8 months respectively. The assets and liabilities of Messrs. Harper and Johnson are to be considered 
at their book figures and the good will is valued at $15,000. 

Make entries to place the good will, cash, notes, and Mr. Ballard's capital on the books. 



[45] 



EXERCISE NO. 117 

PARTNERSHIP 

No. 1. I. W. Kelley sells one-half of his business to Peter Lee for $31,500 cash. The excess of cash paid 
by Lee over and above one-half of Kelley's capital is equal to one-half of two years' average profits less 
6% on the capital invested. On this basis the total good will is valued by Kelley at $18,000. The cash re- 
ceived by Kelley is not to form a part of the capital of the new concern. The following balance sheet was 
used as a basis for negotiations: 

I. W. KELLEY • 

Balance Sheet 

Assets $60,000 Liabilities $15,000 

Kelley's Capital 45,000 



$60,000 $60,000 



Required: 

(a) Journal entry to bring the good will on to the books. 

(b) Kelley's capital account after good will is added. 

(c) Journal entry to place Lee's capital account on the books. 

(d) Balance sheet of Kelley and Lee. 

No. 2. Goodwin and Haven agree to sell a one-third interest in their business to A. C. Gilman. The 
good will is considered to be worth a two years' purchase of the average yearly profit of the years 1914, 1915, 
and 1916, less 6% interest on capital invested. 

Net Profit Capital Invested 
1914— $7,250 1914— $40,000 

1915 — 8,500 1915— 45,000 

1916—10,000 1916— 50,000 

GOODWIN AND HAVEN 

BALANCE SHEET DECEMBER 31, 1916 

Cash $5,000 Liabilities $20,000 

Other Assets 65,000 Goodwin, Capital 30,000 

Haven, Capital 20,000 



$70,000 $70,000 



The good will is to be divided between Goodwin and Haven in the same proportion as their investments. 
Gilman's investment is to be added to the capital of the firm. 

What is the investment of each of the three partners after the transaction is completed ? 

No. 3. G. W. Carter has agreed to admit F. W. Frisbee as an equal partner upon payment of $40,000 
which is to constitute a part of the capital of the new concern. Mr. Carter has assets $75,000 and liabilities 
$40,000. 

Make journal entries required for the deal. 

No. 4. Assuming that in the above problem Carter had sold one-half of his business to Frisbee upon pay- 
ment of $20,000 which was to be converted to his own use by Carter, make all the journal entries necessary 
to bring on the good will and to place Frisbee on the books as a partner. It is also assumed that the books 
formerly used by Carter are to be used by the new firm. 

[46] 



EXERCISE NO. 118 

No. 1. Compute the inward freight which is omitted from the following information: Net Sales $149,- 
290.58; Inventory of March 31, 1917, $18,441.62; Purchases $132,580.91; Purchase Returns $1,719.67; In- 
ventory of September 30, 1917, $19,250.33 ; Gross Profit on Sales $18,924.53. 

No. 2. It is desired to arrive approximately at the net profit of a business without making a physical 
inventory. Assuming that the gross profit on sales will average 36% of the net sales make a profit and loss 
statement from the following information taken from the books June 30, 1917: Inventory December 31, 
1916, $12,428.50; Sales $46,362.88; Purchases $31,010.10; Freight Inward $385.90; Hauling Inward 
$254.58; Selling Expense $6,882.29; Discounts on Purchases $1,338.40; Interest on Notes Receivable $24; 
General Administrative Expense $3,023.75 ; Discounts on Sales $964.44 ; Delivery Expense $763.75 ; In- 
terest on Mortgage Payable $150; Loss on Bad Accounts $165.91 ; Accounts Payable $84,740.22. 

No. 3. A trial balance is found to have a debit footing of $17,968.57 and a credit footing of $18,271.37. 
Upon investigation the following errors are disclosed : 

A purchase amounting to $521.25 has been debited to a creditor as $512.25; the debit side of an entry 
providing for depreciation of motor truck $252, has not been posted ; the total of sales returns book was 
footed $5 short; and a discount allowed to a customer of $25.40 was posted to the wrong side of the Mer- 
chandise Discount account. 

State exactly how you would correct the above errors on the books, giving entries if any ; also give figures 
and footings of the corrected trial balance. It is assumed that controlling accounts are kept. 



[47] 



EXERCISE NO. 119 

Trial Balance of Sterling and Price, June 30, 1918 

Real Estate $32,000.00 

Reserve for Depreciation of Buildings $960.00 

Furniture and Fixtures 1,520.00 

Reserve for Depreciation of Furniture and Fixtures 100.00 

Auto Truck (for delivery) 1,500.00 

Reserve for Depreciation of Auto Truck 150.00 

Cash 3,185.60 

Accounts Receivable 1 1,703.10 

Notes Receivable 750.00 

Inventory December 31, 1917 16,995.40 

Mortgage Payable 15,500.00 

Accounts Payable 3,160.20 

J. E. Sterling, Capital 22,000.00 

O. E. Price, Capital 18,000,00 

Purchases 37,919.60 

Purchase Returns 1,000.00 

Sales 52,533.83 

Sale Returns 840.30 

Salaries of Salesmen 2,466.96 

Office Salaries 720.00 

Store Expense (General) 245.90 

Management Expense 1,400.00 

Office Expense 115.50 

Delivery Expense 970.00 

Real Estate Expense 605.00 

Cash Discount on Sales 1,030.00 

Cash Discount on Purchases 1,090.20 

Interest on Mortgage Payable 310.00 

Loss on Bad Accounts 216.87 



$114,494.23 $114,494.23 

Required: 

(a) Ledger accounts. 

(b) Working Sheet with 10 columns: Trial Balance (2), Adjustments (2), Adjusted Trial Balance (2), 
Profit and Loss (2), Balance Sheet (2). 

(c) Profit and loss statement. 

(d) Balance sheet. 

(e) Adjusting and closing journal entries with full explanations. 

(/) Post journal entries into ledger and rule off accounts that balance. 

General Information: 

Inventory of merchandise on hand June 30, 1918, $15,286.94. 

The building is valued at $20,000. Provide for depreciation at the rate of 3% per annum. 
The Furniture and Fixtures account covers the equipment of both office and store. Store equipment is 
valued at $1,000 and the office equipment at $520. Depreciation is estimated to be 10% per annum. 
The depreciation of the auto truck for the current year is considered to be 20%. 
Reserve $100 for estimated loss on accounts receivable as of June 30, 1918. 
At the closing of the books four days' salary is due to employees. The salaries of salesmen amount to 

[48] 



$94.88 per week. Salary of bookkeeper, who is also the stenographer, is $20 per week. Salary of chauffeur 
$18 per week. 

The mortgage payable, $15,500, is on the real estate; is dated November 1, 1917, and the interest payable 
in equal semi-annual payments, is at 6%. The last interest was paid May 1, 1918. (Compute interest for 
even months.) ', 

The balance of the Notes Receivable account consists of one note dated April 13, 1918, at three months 
and bears interest at 7%. Bring the interest accrued on to the books. 

Number each adjustment on the working sheet by placing a very small circle, with the number inside, on 
the left of each amount. Give the same number to the corresponding journal entry. 

The partners agree to divide the profit or share the losses in the same proportion as their investments bear 
on the trial balance of June 30, 1918. 

Mr. Sterling decides to allow his investment to remain unchanged and wishes his share of the profits 
carried into a "current" account. Mr. Price wishes you to credit $2,000 of his share of the net profit to his 
capital account and the balance, if any, to the "current" account. 



[49J 



EXERCISE NO. 120 

ADJUSTING ENTRIES 

In the following adjustments it is assumed that the necessary Reserve accounts are already on the books. 

No. 1. A desk which cost $60 has been sold for $10. (Value 5) 

No. 2. Salesroom equipment to the amount of $482 has been worn out or discarded during the past year. 

(Value 5) 

No. 3. A machine which cost $5,000 has been discarded and sold for $60. A new machine was pur- 
chased at a cost of $3,500. (Value 10) 

No. 4. An old auto truck which cost $1,700, and $1,250 in cash were given for a new truck priced at 
$1,800. (Value 15) 

No. 5. A concern needing a larger safe purchased one for $400 and the old safe which cost $200 was 
sold for $50. The bookkeeper debited Purchases and credited Cash for the new safe, and debited cash and 
credited Expenses for the amount received for the old safe. Make entries to correct the errors and to place 
the transactions properly on the books. (Value 15). 

No. 6. An examination of a set of books disclosed the following : New office equipment costing $675 was 
debited to Office Expense ; a new wagon costing $250 was debited to Delivery Expense and Office Furniture 
costing $72 became useless and was charged to Profit and Loss at $72. Make entires to correct errors. 

(Value 15) 

No. 7. It is decided to sell the delivery equipment which cost $4,560, and to hire the service hereafter. 
On April 30, 1918, the outfit was sold for $2,850 cash. The books were closed December 31, 1917, when 
10% of the cost was added to the Reserve for Depreciation account making the available reserve $4,000. 
Make entries providing for the depreciation, four months, since the books were closed and to close the 
reserve and equipment accounts. Business period one year. (Value 20) 

No. 8. The Reserve for Discount account has a credit balance of $1,500 which is considered too large 
and at the end of the period instead of adding to the reserve it is decided to reduce it to $500. (Value 5) 

No. 9. An ell was added to a business building. The bookkeeper charged the cost $3,500 to Building 
Repairs. Correct the error. (Value 5) 

No. 10. An explosion shattered the window glass in a portion of a building. The bookkeeper charged 
the cost, $500, to the building. Correct error. (Value 5) 



50 J 



EXERCISE NO. 121 

Evert and Williams 

Trial Balance, June 30, 1919, Before Adjusting Entries Are Made 

Cash $5,240.05 

Accounts Receivable 1 16,935.00 

Notes Receivable 1,844.00 

Mdse. on hand, December 31, 1918 114,862.24 

Land 20,625.00 

Buildings 24,000.00 

Office Equipment 3,954.75 

Delivery Equipment 2,681.20 

Accounts Payable $111,625.87 

Notes Payable 60,000.00 

J. T. Evert, Capital 100,000.00 

J. T. Evert, Drawing Account 1,300.00 

W. B. Williams, Capital 50,000.00 

W. B. Williams, Drawing Account 1,280.00 

Sales 696,219.28 

Sales Returns and Allowances 2,100.00 

Purchases 620,213.30 

Purchase Returns and Allowances 124.90 

General Administrative Expense 23,572.25 

Selling Expense 67,564.12 

Delivery Expense 2,098.00 

Cash Discount on Sales 1 1,459.26 

Cash Discount on Purchases 2,589.63 

Interest 830.51 

$1,020,559.68 $1,020,559.68 

Merchandise Inventory, June 30, 1919 $162,864.51 

Depreciation of Buildings, 2% per annum. 
Depreciation of Office Equipment, 10% per annum. 
Depreciation of Stable Equipment, 10% per annum. 
Charge 30% of delivery expense to Hauling Inward. 

DRAWINGS IN EXCESS OF SALARY 

J. T. Evert W. B. Williams 

$200 

$180 
425 

350 
360 

258 
315 

492 

Interest at 5% is to be allowed on investments of partners, (debit "Interest on Capital" for even months) 
and interest at 6% is to be charged on drawings from date of withdrawal to June 30, 1919. Compute the 
actual number of days between those dates, divide the result by 30 to reduce to months and days and figure 
interest by "Decimal Method." (Credit "Interest on Drawings.") 

No postings have been made to the capital accounts during the current period. 

[51] 



Date 


January 


1, 1919 


February 


3 


March 


5 


April 


28 


May 


10 


June 


3 


June 


20 


June 


21 



It is agreed between the partners that their respective investments shall remain unchanged and that items 
relating to interest on drawings and capital, as well as the division of profit or loss, shall be posted to their 
respective drawing accounts. 

After the interest on drawings and capital has been adjusted the profit or loss is to be divided between the 
partners as follows : 

J. T. Evert — two-thirds 
W. B. Williams — one-third 

Set up suitable accounts for depreciation reserves. Reserve ^2 of 1% of Net Sales to provide for loss on 
uncollectable accounts. 

Both Evert and Williams have drawn a salary each month which has been charged to general adminis- 
trative expense. The excess of drawings over salary allowed has been charged to their drawing accounts. 

Use "Trading Account" in closing entries. 

Required: 

(a) Read and understand every word on the problem sheets before beginning the work. 

(b) Transfer balances from trial balance to ledger accounts on ledger paper not more than five accounts 
to a page. In the ledger use the letters T. B. as a post-mark for such balances. 

(c) Working sheet, ten columns, with adjustments numbered. 

(d) Profit and loss statement. 

(e) Balance sheet. 

(/) Adjusting and closing journal entries with full explanations using "Trading Account" in closing en- 
tries. 

(g) Post adjusting and closing entries into the ledger in regular form, no detail omitted, and rule off the 
accounts that balance. 



[52] 



TEST ON FUNCTIONS OF ACCOUNTS 
Arrange functions of accounts after the following form : 

Salaries and Wages Accrued 



Credit : 

At the end of each period, etc., etc. 



Debit : 

At the beginning of each period, etc., etc. 

The balance of the account represents wages and salaries accrued but not paid and 
should be shown as a current liability on the Balance Sheet. 

Give functions of the following accounts, using the method to which you have been accustomed : 

1. Reserve for Depreciation of Stable Equipment. 6. Partners' Capital. 

2. Office Supplies on Hand. 7. Partners' Drawings. 

3. Taxes Prepaid. 8. Sales. 

4. Accounts Payable. 9. Purchases. 

5. Interest Accrued on Mortgages Payable. 10. Partners' Salary. 

FINAL EXAMINATION IN PRACTICAL ACCOUNTING 
Arey and Walters 

Trial Balance June 30, 1917 (Before Adjusting) 

Cash $2,145.69 

Accounts Receivable 15,478.91 

Reserve for Loss on Bad Accounts $250.00 

Notes Receivable 2,450.00 

Merchandise Inventory December 31, 1916 (Cost) 20,480.90 

Office Equipment 750.00 

Store Equipment 1,580.00 

Accounts Payable , 3,365.00 

Notes Payable 940.00 

L. P. Arey, Capital 16,000.00 

L. P. Arey, Salary 350.00 

J. P. Walters, Capital 14,000.00 

J. P. Walters, Salary 600.00 

Purchases 71,280.75 

Sales 100,490.11 

Purchase Returns 660.00 

Sale Returns 1,640.00 

Salaries of Salesmen 8,000.00 

Advertising 2,000.00 

Traveling Expenses 2,300.00 

Delivery Expense 850.00 

Postage for Selling Department 175.50 

Taxes on Stock 82.50 

Insurance on Stock 200.00 

Insurance on Store Equipment 20.00 

Rent of Store 3,000.00 

Office Salaries 1,400.00 

Office Supplies 156.40 

General Office Expense 56.90 

Management 1,500.00 

[53] 



Telephone and Telegraph 79.50 

Janitor 450.00 

Discount on Sales 1,728.90 

Discount on Purchases 1,150.84 

$137,805.95 $137,805.95 
Merchandise Inventory June 30, 1917 $22,645.91 

1. Adjust the reserve for loss on bad accounts to agree with x / 2 of one per cent of the net sales. 

2. Accrue interest on note receivable of $2,480 at 5%, dated May 16, 1917. 

3. The store and office equipments have been used only six months. Set up a Reserve for Depreciation 
account for each, assuming that the equipment will last ten years. 

4. It is estimated that one-quarter of the advertising is practically in advance and applies to the coming 
period. 

5. Calculate the amount of accrued taxes on the basis of last year's rate of $16.50 per thousand on $20,000. 
It is also agreed that the net gain or loss shall be divided between the partners in the same proportion as 

their investments as shown on the trial balance of June 30, 1917. 

Required: 

(a) Profit and loss statement. 

(b) Balance sheet. 

(c) Adjusting entries. 

(d) Closing entries (using "Trading" account). 

FINAL EXAMINATION IN THEORY OF ACCOUNTS 

Answer questions 1, 2, 3, 4, and 5. Answer any five of the remaining questions. Only the first ten answers 
will be graded. 

1. At the beginning of a fiscal year (business period) the firm of Brown and Bentley decide to sell their 
delivery equipment and to hire the service. The equipment which cost $8,000 and on which there is a 
reserve for depreciation of $6,000, was sold for $3,000. Make journal entries for the transaction and to 
close out the reserve. 

2. Find rate of turnover and the per cent of gross profit on sales to net sales from the following infor- 
mation : 

Operating Expenses $8,920 Inventory January 1, 1917 $6,480 

Sales 48,000 Inventory December 31,1917 5,240 

Accounts Receivable 26,000 Accounts Payable 16,000 

Purchases 25,000 Freight Outward 480 

Real Estate 8,000 Sale Returns 3,400 

Purchase Returns 1,000 Notes Receivable 2,000 

Freight Inward 1,345 

3. You have discounted Casey and Sheldon's note for $2,000 at your bank. Give journal form of entries 
which should be made in case the note is not paid by the maker at maturity. 

4. If a business does not provide for depreciation of equipment what would be the effect on the net profit 
and net capital ? Explain fully. 

5. If "Office Supplies on Hand" on the balance sheet is increased in amount, what account on the profit 
and loss statement is directly affected and how ? (To say that it will increase or diminish the net profit or 
loss will not be considered an adequate answer.) 

6. What should be done to ascertain whether or not closing journal entries have been provided to close 
all accounts that should be closed ? 

7. Give two reasons for decrease in value of equipment. 

8. Is interest accrued on notes receivable an asset? Why? 

[54] 



9. When a business is sold for more than the value of the net assets how is the good will divided between 
the partners? 

10. What is a controlling account and what are the advantages of its use? 

11. Should a partner's salary be charged to an expense account? Why? 

12. Make a statement to account for the difference existing between your check book balance and the bal- 
ance as per the statement rendered to you by the bank. 

FINAL EXAMINATION IN THEORY OF ACCOUNTS 

1. What is the effect on the Profit and Loss Statement, if any, caused by the following conditions? 

(a) An increase of assets. 

(b) An increase of liabilities. 

(c) A decrease of assets. ; 
(rf) A decrease of liabilities. 

(e) Delivery equipment purchased for cash. 

2. What is an "Imprest Fund" and how is it operated and posted ? 

3. What is a "Deferred Charge to Profit and Loss"? State whether it belongs on the balance sheet of 
profit and loss statement. Give two examples. 

4. A's capital, January 1, was $10,000. On the following December 31 his balance sheet showed a net 
profit of $3,000 which he has not withdrawn and he sold out to B for $15,000. (A) Give entry placing good 
will on A's books. (B) Would B in opening his books treat it as an asset or as a liability? 

5. A customer gives you a note for $1,000 dated June 1, due in 6 months and bearing interest at 6%. 
On July 10 you get the note discounted at your bank, discount rate 6%. Give cash book entries for dis- 
counting the note, assuming you are keeping a four-column cash book. 

6. Assuming that you use a "Notes Receivable Discounted" account, make the entry that would be re- 
quired when the bank notified you that the note mentioned in question No. 5 was paid by the maker at 
maturity. 

7. You sell real estate for $16,000 which cost $13,000. $5,000 has been reserved in former periods on 
the buildings. Make journal entries for the sale of the real estate and disposal of the reserve. 

8. If a concern having a large amount of equipment does not provide for depreciation and obsolescence, 
what would be the result ? Explain how this result is brought about. 

9. Net Sales $73,086.89, inventory January 1, $12,149.60, net purchases $52,259.82, inventory December 
31, $12,248.60. Find rate of turnover and percentage of gross profit to net sales. 

10. (a) Equipment costing $4,000 was discarded by a concern which used a modern system of account- 
ing. Make journal entry, (b) Several months after the above entry was made the discarded equipment was 
sold for $820.00 and the clerk debited cash and credited delivery expense $820. Make journal entry to correct 
the error. 



[55] 



EXERCISE F (MODEL) 

E. P. Mason 

Trial Balance, December 31, 1918 

Cash $3,468.90 

Accounts Receivable 6,126.70 

Merchandise Inventory, December 31, 1917 14,874.20 

Land and Buildings 8,126.40 

Furniture and Fixtures 592.00 

Auto Truck 2,000.00 

Accounts Payable $9,849.60 

Notes Payable 1,626.40 

E. P. Mason, Capital 18,846.31 

E. P. Mason, Personal 3,842.00 

Purchases 50,095.42 

Freight Inward 1,825.00 

Purchase Returns 1,240.00 

Sales 78,090.80 

Sale Returns 250.60 

Delivery Expense 2,825.80 

Selling Expense 10,196.20 

Administrative Expense 5,025.00 

Interest on Notes Receivable 14.71 

Discount on Purchases 1,035.00 

Interest on Notes Payable 35.60 

Discounts on Sales 1,249.00 

Loss on Bad Accounts 170.00 

$110,702.82 $110,702.82 
Inventory of merchandise on hand December 31, 1918 $11,218.60 

Required: 

(a) Profit and loss Statement. 

(b) Balance sheet. 

(c) Closing entries. 

Mr. Mason wishes his net profit credited to his personal account. 



[56] 



E. P. MASON 
Working Sheet — One Year Ending December 31, 1918 



Trial Balance 
Dr. Cr. 



Profit and Loss Balance Sheet 

Expenses Income Assets Liabilities 



Cash 


$3,468.90 








$3,468.90 




Accounts Receivable .... 


6,126.70 








6,126.70 




Merchandise Inventory, De- 














cember 31, 1917 


14,874.20 




$14,874.20 










8,126.40 








8,126.40 




Furniture and Fixtures . . . 


592.00 








592.00 




Auto Truck 


2,000.00 








2,000.00 




Accounts Payable 




$9,849.60 








$9,849.60 


Notes Payable 




1,626.40 








1,626.40 


E. P. Mason, Capital .... 




18,846.31 








18,846.31 


E. P. Mason, Personal . . . 


3,842.00 








3,842.00 






50,095.42 




50,095.42 








Freight Inward 


1,825.00 




1,825.00 








Purchase Returns 




1,240.00 




$1,240.00 










78,090.80 




78,090.80 






Sale Returns 


250.60 




250.60 








Delivery Expense 


2,825.80 




2,825.80 








Selling Expense 


10,196.20 




10,196.20 








Administrative Expense . . 


5,025.00 




5,025.00 








Interest on Notes Receivable . 




14.71 




14.71 






Discount on Purchases . . . 




1,035.00 




1,035.00 






Interest on Notes Payable. . 


35.60 




35.60 








Discounts on Sales 


1,249.00 




1,249.00 








Loss on Bad Accounts . . . 


170.00 




170.00 








Merchandise Inventory, De- 














cember 31, 1918 








11,218.60 


11,218.60 




Net Profit 






5,052.29 






5,052.29 




$110,702.82 


$110,702.82 


$91,599.11 


$91,599.11 


$35,374.60 


$35,374.60 



Exercise F Model — Working Sheet 



[57] 



E. P. MASON 
Balance Sheet, December 31, 1918 

ASSETS 

Current Assets: 

Cash $3,468.90 

Accounts Receivable 6,126.70 

Merchandise Inventory 1 1,218.60 

Total Current Assets 

Fixed Assets : 

Land and Buildings 8,126.40 

Furniture and Fixtures 592.00 

Auto Truck 2,000.00 

Total Fixed Assets 

Total Assets 

LIABILITIES AND CAPITAL 

Current Liabilities: 

Accounts Payable $9,849.60 

Notes Payable 1,626.40 

Total Liabilities 

Capital : 

E. P. Mason Investment December 31, 1917 $18,846.31 

Net Profit December 31, 1917 to December 31, 1918 $5,052.29 

Deduct : 
Drawings December 31, 1917 to December 31, 1918 3,842.00 1,210.29 

Total 

Exercise F (Model) Balance Sheet. 



$20,814.20 



10,718.40 
$31,532.60 



$11,476.00 



20,056.60 
$31,532.60 



[58] 



E. P. MASON 
Profit and Loss Statement December 31, 1917 to December 31, 1918 

Gross Sales $78,090.80 

Less: 
Returned Sales 250.60 

Net Sales $77,840.20 

Deduct : 

Cost of Goods Sold: 

Inventory of December 31, 1917 $14,874.20 

Purchases $50,095.42 

Less: 

Returned Purchases 1,240.00 

Net Purchases 48,855.42 

Freight Inward 1,825.00 $65,554.62 

Deduct : 
Inventory of December 31, 1918 11,218.60 54,336.02 

Gross Profit on Sales $23,504.18 

Deduct : 

Operating Expenses: 

Delivery Expense $2,825.80 

Selling Expense 10,196.20 

Administrative Expense 5,025.00 18,047.00 

Net Profit from Operations $5,457.18 

Add: 

Other Income : y ?™&- "'■''' '-' :c 

Interest on Notes Receivable $14.71 

Discounts on Purchases 1,035.00 1,049.71 

Total Income $6,506.89 

Deduct : 

Other Charges: 

Interest on Notes Payable $35.60 

Discounts on Sales 1,249.00 

Loss on Bad Accounts 170.00 1,454.60 

Net Profit December 31, 1917 to December 31, 1918 $5,052.29 

Exercise F (Model) Profit and Loss Statement 



[59] 



CLOSING JOURNAL ENTRIES, DECEMBER 31, 1918 

Sales $250.60 

Sale Returns 

To transfer sales returned to Sales account and to close the Sale Returns 
account. 

31 

Purchases 14,874.20 

Merchandise Inventory (December 31, 1918) 

To transfer inventory at beginning of period to Purchases account and to 
close the Inventory account. 

31 

Purchase Returns 1,240.00 

Purchases 

To transfer the purchases returned to Purchases account and to close the Pur- 
chase Returns account. 

31 

Purchases 1,825.00 

Freight Inward 

To transfer sales returned to Sales account and to close the Sale Returns 
Inward account. 

31 

Merchandise Inventory 1 1,218.60 

Purchases 

To reopen the Merchandise Inventory account and to deduct the unsold goods 
from the entire cost of goods purchased. 

31 

Sales 54,336.02 

Purchases 

To transfer the cost of goods sold to the Sales account and to close the Pur- 
chases account: 

Inventory 12-31-17 $14,874.20 

Net purchases 48,855.42 

Freight Inward 1,825.00 

$65,554.62 
Deduct : 
Inventory 12-31-18 11,218.60 

Cost of Goods Sold $54,336.02 

31 

Sales 23,504.18 

Profit and Loss 

To transfer the gross profit on sales to the Profit and Loss account and to 
close the Sales account. 

31 

Profit and Loss 18,047.00 

Delivery Expense 

Selling Expense 

Administrative Expense 

To transfer the accounts showing operating expense to Profit and Loss and 
to close the Operating Expense account. 

[60] 



31 

Interest on Note Receivable 14.71 

Discount on Purchases 1,035.00 

Profit and Loss 1,049.71 

To transfer the accounts with other income to Profit and Loss account and 
to close the other income accounts. 

31 

Profit and Loss 1,454.60 

Interest on Notes Payable 35.60 

Discount on Sales 1,249.00 

Loss on Bad Accounts 170.00 

To transfer the accounts showing other charges to Profit and Loss account 
and to close the accounts with other charges. 

31 

Profit and Loss 5,052.29 

E. P. Mason, Personal Account 5,052.29 

To close the Profit and Loss account and to transfer the net profit for the 
period to E. P. Mason Personal account. 

Exercise F (Model) Closing Entries 



161 J 



E. P. MASON 
Profit and Loss Statement, December 31, 1917, to December 31, 1918 

Gross Sales $78,090.80 

Less: 

Returned Sales $250.60 

Discounts on Sales 1,249.00 1,499.60 

Net Sales $76,591.20 

Deduct Cost of Goods Sold: 

Inventory of December 31, 1917 $14,874.20 

Purchases $50,095.42 

Less: 

Returned Purchases $1,240.00 

Discounts on Purchases 1,035.00 

2,275.00 47,820.42 

Freight Inward 1,825.00 

$64,519.62 

Less: 

Inventory, December 31, 1918 11,218.60 53,301.02 



Gross Profit on Sales $23,290.18 

Deduct : 

Operating Expenses: 

Delivery Expense $2,825.80 

Selling Expense 10,196.20 

Administrative Expense 5,025.00 18,047.00 



Net Profit from Operations 5,243.18 

Add: 

Other Income: 

Interest on Notes Receivable 14.71 

Total Income $5,257.89 

Deduct : 

Other Charges : 

Interest on Notes Payable $35.60 

Loss on Bad Accounts 170.00 205.60 



$5,052.29 



Exercise F (Model) — Profit and Loss Statement Conforming to the Federal Tax Income Law 



[62] 



STERLING AND PRICE 

Balance Sheet — June 30, 1918 

ASSETS 
Fixed Assets : 

Real Estate ***** ** 

Less Reserve for Depreciation **** ** ***** ** 

Furniture and Fixtures *** ** 

Less Reserve for Depreciation *** ** **** ** 

Auto Truck ***** ** 

Less Reserve for Depreciation , *** ** **** ** 

Total Fixed Assets 

Current Assets: 

Cash **** ** 

Accounts Receivable ***** ** 

Less Reserve for Bad Debts ** ** ***** ** 

Notes Receivable *** ** 

Interest Accrued on Notes Receivable ** ** 

Merchandise Inventory ***** ** 

i 
Total Current Assets 

Total Assets 

LIABILITIES AND CAPITAL 

Fixed Liabilities : 

Mortgage Payable ***** ** 

Total Fixed Liabilities 

Current Liabilities : 

Accounts Payable **** ** 

Salaries Accrued ** ** 

Interest Accrued on Mortgage Payable *** ** 

Total Current Liabilities 

J. E. Sterling, Capital: 

Balance, December 31, 1917 ***** ** 

Eleven-twentieths Net Profit **** ** 

Balance, June 30, 1918 

O. E. Price, Capital: 

Balance, December 31, 1917 ***** ** 

Nine-twentieths Net Profit **** ** 

Balance, June 30, 1918 



*;£* ** 









Model G 
[63] 






FORM OF BALANCE SHEET TO BE USED WITH EXERCISE NO. 121 

EVERT AND WILLIAMS 
Balance Sheet, June 30, 1918 

ASSETS 

Current Assets : 

Cash **** ** 

Accounts Receivable ****** ** 

Less Reserve for Bad Debts **** ** ****** ** 

Notes Receivable **** ** 

Merchandise Inventory (cost) ****** ** 

Total Current Assets 

Fixed Assets : 

Real Estate ***** ** 

Less Reserve for Depreciation of Buildings *** ** ***** ** 

Office Equipment **** ** 

Less Reserve for Depreciation *** ** **** ** 

Delivery Equipment **** ** 

Less Reserve for Depreciation *** ** **** ** 

Total Fixed Assets 

LIABILITIES AND CAPITAL 
Current Liabilities : 

Accounts Payable ******* ** 

Notes Payable ***** ** 

Total Current Liabilities 

J. T. Evert's Capital : 

Balance, December 31, 1917 ****** ** 

Add: 

Interest on Investment, Six Months at 5% per annum **** ** 

Two-thirds Net Profit for the Period **** ** ******* ** 

Deduct : 

Drawings in Excess of Salary during Six Months ending June 

30, 1918 **** ** 

Interest on Drawings ** ** **** ** 

Balance, June 30, 1918 

W. B. Williams's Capital : 
Balance, December 31, 1917 ***** ** 



****** ** 



******* ** 



******* ** 






******* ** 



[64] 



Add: 

Interest on Investment — Six Months at 5 Jo per annum **** ** 

One-third Net Profit for the Period **** ** ****** ** 

Deduct : 

Drawings in Excess of Salary during Six Months Ending June 30, 
1918 # # ** ** 

Interest on Drawings ** ** ***** ** 

Balance, June 30, 1918 ******* ** 



Total ******* ** 

Model H 



[65] 



MODEL! balance sheet 

JOHN B. THOMAS 
BALANCE SHEET DECEMBER 31, 1919. 

Assets 

Current Assets : 

Cash 

Accounts Receivable $41,060.90 

Less: 

Reserve for Bad Debts $3,235. 

Reserve for Discounts 1,120. 4,355.00 

Notes Receivable 

Interest accrued on Notes Receivable 

Merchandise Inventory (cost) 

Total Current Assets 

Fixed Assets : 

Real Estate 44,000.00 

Less Reserve for Depreciation of Buildings 3,900.00 

Store Equipment 3,700.00 

Less Reserve for Depreciation 900.00 

Office Equipment 1,221.44 

Less Reserve for Depreciation 360.00 

Delivery Equipment 2,000.00 

Less Reserve for Depreciation 500.00 

Total Fixed Assets 

Deferred Charges to Profit and Loss : 

Stationery and Supplies on Hand 

Insurance Premiums Unexpired 

Advanced Advertising 

Taxes Prepaid 

Total Deferred Charges 

Total 

Liabilities and Capital 

Current Liabilities : 

Accounts Payable 

Notes Payable 

Interest Accrued on Notes Payable 

Salaries Accrued 

Total Current liabilities 

[66] 



$3,209.80 



36,705.90 

1,450.00 

48.50 

13,829.70 



40,100.00 



2,800.00 



861.44 



1,500.00 



58.00 

150.50 

1,200.00 

620.50 



$55,243.90 



45,261.44 



2,029.00 
$102,534.34 



13,100.00 

1,000.00 

73.40 

200.00 



14,373.40 



Fixed Liabilities : V » ,# ". *.•• '• '•' V '•*'• •••••'• 

Mortgage Payable 5,000.00 

Total Fixed Liabilities 5,000.00 

Total Liabilities 19,373.40 

Capital : 

John B. Thomas' Investment December 31, 1918 71,000.00 

Net Profit December 31, 1918 to December 31, 1919; 12,230.94 

Less Salary Overdrawn 70.00 12,160.94 83,160.94 



Total 102,534.34 

Model I 



[67] 



•'•••• : 'm&DEV PROFIT .-AND LOSS STATEMENT 

JOHN B. THOMAS 

PROFIT AND LOSS STATEMENT DECEMBER 31, 1918 TO DECEMBER 31, 1919. 

Gross Sales $110,218.70 

Less Returns 1,250.80 

Net Sales $108,967.90 

Deduct : 

Cost of Sales: 

Inventory December 31, 1918 $15,189.70 

Gross Purchases $70,829.70 

Less Returns 902.60 69,927.10 

Freight Inward 1,260.40 86,377.20 

Deduct : 

Inventory December 31, 1919 13,829.70 72,547.50 

Gross Profit on Sales 36,420.40 

Deduct : 

Operating Expenses : 

Selling Expenses 10,725.62 

Delivery Expenses 2,089.67 

General Administration Expenses 8,551.26 

Real Estate Expense 1,200.00 22,566.55 

Net Profit from Operations 13,853.85 

Add: 

Other Income: 

Discount on Purchases 1,891.69 

Interest on Notes Receivable 65.00 1,956.69 

Total Income 15,810.54 

Deduct : 

Other Charges: , 

Discount on Sales 2,210.00 

Interest on Notes Payable 125.00 

Loss on Bad Accounts 1,243.60 3,578.60 

Net Profit December 31, 1918 to December 31, 1919 12,231.94 

Model J. 



[68] 



/E 02726 




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