The liabilities assumed were: accounts payable, as per schedule following, $10,126.73; notes payable $4,692.18. Upon the guaranty by Jackson, Edwards, Hansen of the accounts and notes receivable taken over, the company assumed the contingent liability on notes receivable under discount amounting to $250. No cognizance was taken of prepaid discount.
Payment was made to Jackson, Edwards, Hansen by the cancellation of indebtedness on their subscription contracts in the amounts severally shown, and in cash for the balance (distributed in the ratio of their subscriptions)—Jackson $54.44, Edwards $39.19, and Hansen $27.34.
A. H. Lawrence and H. C. McCullough on September 20 paid in cash 75% of their subscriptions, the balance due in 30 days. Certificates of stock, properly executed, were issued September 20 to all the above-mentioned parties, except Noble, in the amounts of their subscriptions.
Open the books and prepare a balance sheet of the company according to the data given.
Instructions
The fourth method illustrated in Volume I, pages 454 and 457, is to be used for opening the books.
Record the cash payment of organization tax as on September 1.
The purchase of the Jackson, Edwards, Hansen business is to be recorded under date of September 1, making use of the accounts “Jackson, Edwards, Hansen, Vendors” and “Plant and Sundry Assets.” Upon receipt of the appraisal committee’s report, bring the detailed assets and liabilities onto the books. It is to be noted that only one Inventory account is carried, in which the detail must be shown, using one line for each kind of commodity. Bring the discounted note on the books. This is not included in the amount given for notes receivable outstanding.
In a small corporation with stock closely held, certificates are sometimes issued although not yet fully paid for.
VI