Note that both the Contingent Royalty Fund and its reserve are free. Transfer the fund to general cash, and the reserve to surplus.
Note that the reserve for supersession of patents is a reserve created out of surplus and therefore to be treated as a part of net worth. This is, of course, contrary to best practice.
Fire Loss account, as it appears in the trial balance, has been properly charged with the values of the assets destroyed but has not yet been credited with the insurance. Consider carefully the proper booking of the repairs to buildings on account of the fire.
See Problem XXVI, Appendix A, for instructions as to content of condensed balance sheet. See also Problem XV, this Appendix.
XV
From the information furnished in the preceding problem.
- (a) Construct a surplus statement.
- (b) Write the adjusting and closing journal entries.
Treat the surplus statement as a schedule supporting the balance sheet.
XVI
Some time ago the stockholders of the A. M. Strong Fiber Co. and the Randall Manufacturing Co. appointed committees on merger. At a joint meeting of the two committees a plan for merger of the two companies was adopted. The stockholders of the respective companies accepted the plan for the joint committee and instructed and authorized their boards of directors to carry out the terms of the merger. The agreement provided that a new corporation be formed to acquire the assets and assume the liabilities of the two companies as shown on their balance sheets of December 31, 1916, except as noted.