Show in journal form the entries covering the above.
20. A corporation’s profits for the year ended December 31, 19—, amount to $451,000. The by-laws require a reserve equal to 10% of any dividend paid to common stockholders, and any surplus remaining after such dividend has been paid is also to be applied to the reserve, until such reserve account amounts to $250,000. The reserve at December 31, one year before, was $156,020. The capital is $2,000,000, one-half cumulative preferred 6%, and one-half common, all fully paid. On December 31, 19—, the date first mentioned, the preferred dividend is two and one-half years in arrears. On December 31, one year before, the Profit and Loss account was in debt $202,000.
Set out your treatment of the profit for the year between these dates.
21. On April 1, 19—, the Healey Manufacturing Company is incorporated with an authorized capital of $100,000 common stock, and $50,000 preferred stock. The preferred stock is subscribed for and paid in full. One-half of the common stock is subscribed for, less 10% discount, the subscribers paying one-half in cash, the balance to be paid in two months. On June 1, the balance on the common stock subscribed for on April 1 is paid, and the remainder of the authorized common stock is sold for cash at 10% premium.
Make the entries required for the above transactions.
22. In auditing the accounts of a corporation for the current year, it was found that for the previous year the inventory had been undervalued $2,000; accrued wages $3,150, and rent receivable earned but not yet due $750, had not been taken into consideration. The surplus at that time, $25,000, is increased during the current period to $40,000. During the current year a piece of real estate owned by the corporation was sold at a profit of $5,000; a fire resulted in a loss of $10,000; accounts receivable that had been charged off as worthless were collected to the amount of $1,000. Dividends amounting to $15,000 were declared.
Bring the above transactions onto the books.
Cash and Petty Cash
23. On June 7, 19—, when balancing cash you found that you were over $153.75. Part of it was due to the following, which you corrected:
Duplicated an entry on the credit side for $12 paid for postage; an error of $10 in addition on the debit side, decreasing the total.