2. At the end of the year net profits amount to $15,000, with a previous surplus balance of $50,000. Preferred stock amounts to $100,000, of which $20,000 is treasury stock; common amounts to $150,000, of which $50,000 has not been issued. The directors declare an 8% dividend on the preferred, and a 10% on the common, and appropriate $5,000 to a sinking fund reserve. Later the above dividends are paid. Make the entries needed to bring the above onto the books.
3. A corporation authorizes a $250,000 bond issue, of which $150,000 are traded for a plant, and $50,000 are sold on the open market at 102. The bonds bear 6% interest, payable semiannually. Show how you would handle the above transactions. Show your treatment at the time of the first interest payment, assuming the bonds to mature in 25 years.
Instructions
Problem 1 refers to the Cotten, Wooster & Co. problem.
Problems 2 and 3 do not relate to Cotten, Wooster & Co.
XIII
Summarized transactions for June were:
- Purchases:
- American Dry Goods Co., 2/10, n/60, $16,145.75.
- Associated Dry Goods Co., 2/10, n/60, $15,927.80.
- Claflins, Inc., 2/10, 1/30, n/60, $17,894.60.
- Wico Mills, Inc., 2/10, 1/30, n/60, $4,792.45.
- U. S. Dry Goods Co., 3/10, 2/15, n/60, $15,867.42.
- Miller & Rhoades, Inc., 2/10, 1/30, n/60, $16,279.80.
- Newcomb Endicott Co., 2/15, n/60, $15,318.40.
- Wm. Taylor, Son & Co., 3/5, 2/10, n/30, $5,728.
- Marshall Field & Co., 3/10, 2/15, n/60, $6,716.90.
- Cash purchases $1,813.40.
- Sales:
- Arnold Sheriff & Co., 2/10, 1/15, n/30, $8,465.90.
- Baird Dry Goods Co., 2/10, 1/15, n/30, $7,964.60.
- Burrows Dry Goods Co., 2/10, n/30, $6,279.45.
- Bostonian Dry Goods Co., 2/10, 1/15, n/30, $9,763.80.
- Childs & Son, 2/10, 1/15, n/30, $7,942.45.
- Eagle Dress Goods Co., 2/10, n/30, $8,246.70.
- Emporium Dry Goods Co., 2/10, n/30, $7,847.65.
- Falk & Taylor, 2/10, 1/15, n/30, $8,972.70.
- Hudson Dry Goods Co., 2/10, 1/15, n/30, $7,432.80.
- Macmillian & Co., 2/10, n/30, $6,972.50.
- Marquis Dress Goods Co., 2/10, n/30, $8,414.
- Metropolitan Dry Goods Co., 2/10, n/30, $3,985.
- Melrose Dry Goods Co., 2/10, 1/15, n/30, $8,945.
- New York Silk Co., 2/10, 1/15, n/30, $7,987.50.
- Southern Dry Goods Co., 2/10, n/30, $9,475.65.
- Cash sales $1,472.60.
- Journal:
- Out-freight for May was $157.90.
- Returned goods received from Daniel & Co., $1,875;
- and Thompson Hudson Co., $935.
- Received from Rogers & Son, Charles L. Sutton & Co.’s 90-day
- 6% note for $5,000, dated May 5, with 40 days’ interest
- accrued, in payment of their April bill, the balance of
- the payment in cash.
- Returned $967.50 of merchandise to Miller & Rhoades, Inc.;
- and $614.75 to Wico Mills, Inc.
- Cash over of May was partly accounted for by failure to book
- sale of old crates and supplies for $35.
- The note of the Silk & Dress Goods Exchange, extended to and
- due June 23, was not paid, as the firm was still in difficulties.
- A mortgage for $25,000 was given to complete the purchase
- of the building. (See “Cash Disbursements.”)
- Cash Receipts:
- Arnold Sheriff & Co., June bill $8,465.90 less 2%
- Atlas Dry Goods Co., balance of April bill $3,890.70.
- Century Dress Goods, balance of April bill $1,802.90.
- Daniel & Co., on account $5,000.
- Henry Miller, on account $2,500.
- National Dress Goods Co., balance March bill $238.90.
- Public Bargain Store, on account $500
- Rogers & Son, balance April bill $2,793.57.
- Thompson Hudson & Co., balance May bill $8,007.75 less 2%.
- Bostonian Dry Goods Co., June bill $9,763.80 less 2%.
- Southern Dry Goods Co., June bill $9,475.65 less 2%.
- Macmillian & Co., June bill $6,972.50 less 2%.
- Cash Disbursements:
- Salesmen’s salaries $5,340.
- Salesmen’s traveling expenses $2,917.94.
- Delivery expenses $978.42.
- Shipping supplies $523.80.
- Advertising for July $3,000, less $250 for prepayment.
- Freight and haulage $569.70.
- Rent for July $1,250.
- Insurance on auto trucks $250.
- Lighting and heating $92.70.
- Office salaries $2,465.
- Office supplies $369.74.
- Office expenses $1,254.60.
- General expenses $1,219.62.
- Cotten withdrew June 15 $400; Wooster $500.
- Bentley, Gray & Co., May bill $9,764.90 less 2%.
- Wm. Taylor, Son & Co., June bill $5,728 less 2%.
- Semiannual dues to the Merchants’ Association $50.
- Purchased a lot and building for $35,000, paying
- $10,000 in cash and the balance remaining on mortgage.
Instructions
Charge the Silk & Dress Goods Exchange note to their account.