Appendix B contains a series of well-graded problems more or less closely connected, illustrating, by means of its method of keeping accounts, the growth of the business. Single entry is changed to double entry, a simple trading business into a complex manufacturing concern, and many of the problems peculiar to such types of business organization are incorporated. Some unrelated problems illustrating special forms of statements, combinations, capitalization, and the consolidated balance sheet are also included.
Appendix C contains a group of unrelated, miscellaneous problems, taken mostly from C. P. A. examinations. These can be used to supplement the assignments from Appendices A and B and to give variety to the work during succeeding years.
I
Problems
1. J. B. Rogers and B. R. Jay, owners of similar businesses, agree to consolidate under a partnership agreement whereby each turns over his business as it stands, subject to the liabilities shown, and the deficient partner contributes sufficient cash to equalize their capitals. Rogers’ standing is: cash $750; merchandise $3,900; notes receivable $1,000, with interest accrued on same $10.25; accounts receivable $750, estimated as worth $725; furniture $975; notes payable $1,000, being his personal non-interest bearing note at 60 days discounted at 8% with 20 days yet to run; accounts payable $325. Jay’s standing is: cash $365; merchandise $4,500; accounts receivable $1,350, guaranteed as good; furniture $825; delivery equipment $325, valued at $300; accounts payable $265; notes payable $1,200, with accrued interest of $8.69; salaries earned but unpaid $50. The furniture in each case is taken in at its face value.
Make the opening journal entry and balance sheet for the new firm. Make journal entries for each partner to close his old set of books.
2. From the following information take a trial balance, make closing journal entries and summary statements as of December 31.
Notes receivable on hand $3,000; accounts receivable $7,500; notes payable $2,100; accounts payable $4,600; real estate $6,000; plant and machinery $8,000; rent and taxes $600; general expense $2,000; salaries $1,500; wages $600; freight $150; duty $200; cash on hand $150; cash in bank $1,800; bad debts written off $140; goods on hand at beginning of year $9,500; purchases $26,000; sales $40,000; interest paid $210; furniture $600; Jas. Buckham, partner, invested $10,000, withdrew $1,450; E. J. Cockburn invested $14,000, withdrew $1,300; the merchandise on hand is valued at $9,000; rent unpaid $250; insurance unexpired $140; interest accrued on notes receivable $25; wages accrued $115. Allow 10% depreciation on plant and machinery, and 12½% on furniture. Estimate losses from bad debts as 5% of accounts and notes outstanding. Losses and gains are divided ⁴/₇ to Cockburn and ³/₇ to Buckham. Interest on capitals at 6% is to be allowed.
3. At the end of the first year of a partnership, Wilson has an interest of $18,000 and Peters of $9,000, each drawing profits in proportion to his capital.
They decide to admit Johnson into the partnership, selling him a one-quarter interest, valuing their good-will at $3,000. Under the conditions named, in what two ways may Johnson secure his interest? What will be the amount of his investment in each case?