The partnership agreement further provided that Cotten was to be allowed an annual salary of $4,800, Wooster $6,000, but Woolsey was to receive no salary; and that interest at the rate of 6% per annum was to be charged on the drawings in excess of the salary allowed for the fiscal period from the date such drawings exceeded salary until the date of closing the books. The drawings of Woolsey were also to be charged at 6% per annum from the date of draft to the date of closing the books. Interest at 6% per annum was to be allowed on capital, and in all cases was to be figured on the basis of 360 days to the year, 30 days to the month. Profits and losses were to be shared as follows: Woolsey 20%, Cotten 36%, and Wooster 44%. The fiscal period was to consist of six months, ending on June 30 and December 31, respectively.
The partnership agreement also provided that the capital accounts of the partners were to remain intact and that any credit balances remaining in the partners’ personal accounts at the close of the fiscal period were to be transferred to their loan accounts which were to be treated as current accounts bearing 6% interest and subject to adjustment of interest at the close of each fiscal period.
Make the necessary entries in general journal and cash book to record the respective investment transactions, and post.
Instructions
Make a full but concise statement of the partnership agreement, following the form of opening entry illustrated on [page 166]. This opening statement is the first record in the general journal and should provide all of the information needed by the bookkeeper for the proper handling of the partners’ accounts at the close of the fiscal period.
Immediately following this narrative will be the formal investment entries. On the line just preceding the formal investment entry for each of the partners, use the following—or similar—phraseology: “C. Allen Cotten made the following investment.” A separate investment entry is made for each partner.
These entries are to be made complete in the general journal and posted immediately, except the several cash items, which, included in the totals of the cash book, will be posted at the end of the month. These cash items will therefore be checked both in the journal and in the cash book, where they must be entered in the “General Ledger” and “Net Cash” columns.
III
Summarized transactions for the month of January were as follows. Enter these in their respective journals. Posting of these entries will comprise the next assignment.
- Purchases:
- American Dry Goods Co., 2/10, n/60, $10,817.50.
- Bentley, Gray & Co., 2/10, n/60, $5,694.
- Claflins, Inc., 2/10, 1/30, n/60, $12,639.
- Carter Dry Goods Co., 2/10, 1/30, n/60, $18,709.48.
- U. S. Dry Goods Co., 3/10, 2/15, n/60, $12,104.90.
- Miller & Rhoades, Inc., 2/10, 1/30, n/60, $2,689.40.
- Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $1,897.42.
- Marshall Field & Co., 3/10, 2/15, n/60, $11,744.60.
- Cash purchases were $2,564.73.
- Sales:
- Arnold Sheriff & Co., 2/10, 1/15, n/30, $5,264.80.
- Baird Dry Goods Co., 2/10, 1/15, n/30, $4,872.35.
- Bostonian Dry Goods Co., 2/10, 1/15, n/30, $3,843.68.
- Century Dress Goods Co., 2/10, n/30, $5,492.72.
- Childs & Son, 2/10, 1/15, n/30, $4,794.12.
- Daniel & Co., 2/10, n/30, $4,683.38.
- Eagle Dress Goods Co., 2/10, n/30, $5,978.35.
- Emporium Dry Goods Co., 2/10, n/30, $2,461.93.
- Falk & Taylor, 2/10, 1/15, n/30, $5,947.60.
- Hudson Dry Goods Co., 2/10, 1/15, n/30, $3,678.90.
- Macmillian & Co., 2/10, n/30, $4,642.50.
- Marquis Dress Goods Co., 2/10, n/30, $4,267.50.
- Metropolitan Dry Goods Co., 2/10, n/30, $4,180.
- Silk & Dress Goods Exchange, 2/10, n/30, $3,780.40.
- Cash sales were $847.56.
- Cotten took woolens on January 15, $50.
- Journal:
- Goods for $500 were returned by Falk & Taylor as unsatisfactory.
- Macmillian & Co. was credited with $435 because of goods lost in
- transit, for which a claim was filed against the
- Central Hudson Railway Co.
- Damaged goods were returned to Carter Dry Goods Co., $897.80.
- Received 6% 60-day note, due March 28, from Century Dress Co.
- for January bill $5,492.72 less a special discount of 5%.
- Cash Receipts (excluding those listed above):
- Arnold Sheriff & Co., January bill $5,264.80 less 2%.
- Bostonian Dry Goods Co., January bill $3,843.68 less 1%.
- Falk & Taylor, balance of January bill $5,447.60 less 2%.
- Hudson Dry Goods Co., January bill $3,678.90 less 1%.
- Atlas Dry Goods Co., December bill $2,283 net.
- Century Dress Goods Co., December bill $4,800 net.
- Falk & Taylor, December bill $3,400 less 2%.
- Rogers & Son, December bill $3,650 less 2%.
- Cash Disbursements (excluding those listed above):
- Shelving, partitions, counters, etc., for store $3,800.
- Desks, tables, mimeograph, and typewriters for office $1,250.
- A new Pierce motor truck $5,000.
- Deposit with the Westchester Lighting Co. $50.
- Salesmen’s salaries $2,000.
- Salesmen’s traveling expenses $997.84.
- Wages of chauffeurs and shipping clerks $500.
- Garage rent $125.
- Repairs to cars $50.
- Licenses for trucks $50.
- Oil and gasoline $50.
- Boxes, crates, nails, paint, etc., for shipping $297.13.
- Advertising according to contract with
- Baten Advertising Co. $5,000
- Freight and haulage $312.49.
- Insurance on stock $250.
- Lighting and heating service cost $502.60.
- Office salaries $990.
- Stationery, pads, pencils, envelopes, etc., $193.97.
- Telephone and telegraph $422.
- Postage and special messenger service $237.84.
- Wages of cleaners, watchman, repairs to elevator $594.70.
- Check to American Red Cross $100.
- Semiannual dues to the Merchants’ Association $50.
- Rent for January $1,250.
- Cotten drew $400; Wooster $500.
- Associated Dry Goods Co., December bill $3,950 less 2%.
- Claflins, Inc., December bill $6,290 less 2%.
- Wico Mills, Inc., December bill $2,780 net.
- Newcomb Endicott Co., December bill $3,678 less 2%.
- Marshall Field & Co., December bill $3,230 less 2%;
- and January bill $11,744.60 less 2%.
- Carter Dry Goods Co., balance of January bill $17,811.68 less 2%.
- U. S. Dry Goods Co., January bill $12,104.90 less 3%.
- American Dry Goods Co., January bill $10,817.50 less 2%.
- Cash was short $3.16.
- Rent for February $1,250.