(f) The discount on capital stock, charged to Factory Building, is to be taken out and shown as a separate item under its own name.
(g) An analysis of the sales developed that: on desks and tables sales gross profit was 47%, and rate of turnover was 9+; on bookcases and filing cabinets gross profit was 38% and turnover 6.4+; and on sundry office supplies a gross loss of 17+% was sustained and the turnover was only 3+. Taken as a whole, the selling expense was too high, very probably due to salesmen’s abnormal traveling expenses and commissions. The present commissions policy was severely condemned as tending to an increase of sales without regard to the financial standing of the customer. For the purpose of establishing a consistent policy of passing on credits and following up collections, the installation of a department of credits and collections was advised.
(h) It was advised that the petty cash be taken out of the bookkeeper’s control.
(i) Of the 1915 taxes charged to Surplus, one-third should have been charged to Profit and Loss.
Make all of the entries necessary to adjust the books in accordance with the auditor’s suggestions. Post, close, and draw up corrected statements, including the adjustments to Surplus. Supporting schedules may be omitted; the condensed statements will be sufficient.
Instructions
Study carefully all the suggestions made by Goodman and determine the proper correcting entries. All necessary accounts have already been set up on the books.
The principles involved in suggestions (a) and (b) are covered in [Chapter XII]. For (c) see Volume I, Chapter L, and [Volume II, Chapter XIII]. Take cognizance of the accrued commission. For (e) [see Chapter XVIII], and for (f) [see Chapter XXI]. For the surplus statement to show all adjustments made through it, [see Chapter XXIII].
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Practice Data