2. The profits of a manufacturing company with a paid up capital of $100,000.00, are $9,765.00. The directors, by proper resolution, declare a cash dividend of 6 per cent, set aside a surplus of $3,000.00, and transfer the balance to undivided profits.
Make all necessary entries in general books, showing ledger accounts after payment of dividends.
3. The following year's business of the above company showed a loss of $2,160.00. How is this loss disposed of? Make entries.
4. A company capitalized at $250,000.00 has sold $100,000.00 of its stock, the balance being unsubscribed. Its accumulated surplus is $90,000.00, and the directors declare a stock dividend of 50 per cent to all stockholders. Make all entries.
5. A manufacturing company has a capital stock of $100,000.00. One item in its assets is machinery $26,750.00. The profits for the year are $11,640.00. The directors provide for a reserve for depreciation of machinery of 10% and declare a dividend of 5%.
Make all entries.
CHANGING BOOKS FROM A PARTNERSHIP TO A CORPORATION
38. Wilson, Brackett, and Nixon have been conducting a retail clothing business under a partnership agreement. Appreciating the advantages of a corporate form of organization, they decide to incorporate under the name of the Continental Clothing Company.
The first step necessary to prepare for the incorporation of a partnership is to ascertain the net capital of the business as it stands. Accordingly, an inventory is taken, the books are closed, and a balance sheet prepared with the following results: