(c) Write the journal entries necessary to adjust the books of the A. M. Strong Fiber Co. and to show its sale and the transfer of its properties to the Sterling Trunk Corporation.
XVII
1. A fire partially destroyed the power plant and equipment of the Zehner Manufacturing Co. on the night of June 30, 1918, entailing a loss of $25,000 on the building, and a ⅔ loss on the equipment. Insurance for one year, with the 80% coinsurance clause, had been purchased January 1, 1918, for $1,775, covering the above property. The policies carried $40,000 on the power house and $100,000 on the power house equipment. On that date—January 1, 1918—the values of the power house and equipment as shown on the balance sheet were:
| Power House | $75,000.00 | |
| Less Depreciation Reserve | 12,000.00 | $ 63,000.00 |
| Power House Equipment | $200,000.00 | |
| Less Depreciation Reserve | 80,000.00 | 120,000.00 |
Depreciation was estimated at the rate of 4% per annum on the power house, and 10% on the equipment.
The insurance company settled on the above basis.
Show the journal entries necessary to make all the adjustments in the accounts.
For the purpose of the problem assume that the rate on the power house was the same as on the equipment.
2. The Colorado Rock Drill Co. authorized the issue of $100,000 of 6% cumulative preferred stock callable by lot in amounts as follows:
- $10,000 at the end of 5 years at 107 in cash.
- $10,000 at the end of 7 years at 106 in cash.
- $15,000 at the end of 10 years at 105 in cash.
- $15,000 at the end of 12 years at 104 in cash.
- $50,000 at the end of 20 years at par in cash
- or convertible into the company’s common
- stock at the option of the company.