Merchandise inventory, $1178.32; prepare Profit and Loss Statement; prepare Balance Sheet; make closing entries.

Exercise 3

From the following trial balance of December 31, 19—, prepare Profit and Loss Statement; prepare Balance Sheet; make closing entries:

Inventory, December 31, 19-, $18,720.48; office supplies on hand, $150.

CASH BOOK EXERCISES

These exercises are intended for cash books with special columns and should be used following or in connection with the May work.

Exercise 1

Design a cash book on separate journal paper and record therein the cash transactions occurring in Exercises in Journalizing, exercise No. 5, page 132, following the instructions given above. Close the cash book at the end of the month.

Exercise 2

Design a cash book on separate journal paper and record therein the cash transactions occurring in the months of January, February, and March given in the Exercises for Journalizing, exercise No. 6, page 133. Close the cash book at the end of each month.

Exercise 3

Record the following transactions in a cash book and balance the book following the last

entry.

May 1, 19 Balance, $3124.12.

2 J. W. Monroe pays his account of $115.

3 We give A. C. Bell our check for $75 in payment of one month's rent of store.

4 Pay A. W. Stone's invoice of August 18, amounting to $1693.50, less 2% discount.

5 The First National Bank discounts note of C. W. Norris for $320; period of discount, 27 days; rate of discount, 4%.

6 Pay freight on invoice of goods received from Wanamaker & Co., $17.85.

6 A. P. Smith, traveling salesman, reports this week's expense bill, $61.20, and we remit him New York draft for this amount.

8 An office desk which we do not need is sold to H. L. Parker for $45.·

9 Pay taxes on property located at 165 Elm St., $41.20.

10 Randell & Co. send us a check in payment of a bill of goods sold them April 1, amounting to $387.25, less 3%.

11 Receive a check of $175 from A. W. Summer to apply on a note of $500, which we hold against him.

12 Pay our note of $270 due to-day, held by the Fourth National Bank, with 90 days' accrued interest at 6%.

13 Receive a check from Miller Bros. for $17.50 in payment of interest on a note which we hold against them.

14 Loan W. H. Wilson $200, and take his note for 60 days as security.

15 Cash sales of merchandise for the day amount to $97.40.

16 Buy of W. A. Clark Coal Co., 16 tons coal at $7.80 per ton.

17 The First National Bank discounts our $200 note and credits our account for the proceeds. Discount at 51% for 4 months.

20 Pay salaries of bookkeepers and stenographers to date, $60.

Exercise 4

June 1, 19- Balance, $4722.85.

2 E. B. Hunt pays $225 on his account.

3 Cash sales of merchandise, reported by our delivery wagon, amount to $22.50, turned in by the driver.

4 Pay our coal bill for March, $15.

5 We pay for invoice of goods bought of J. M. Snow on February 1, less 2% discount allowed us. Amount of invoice, $1230.

6 Pay our note held by the First National Bank due to-day, with 30 days' interest at 6%. Face of note, $350.

6 J. M. Hastings withdraws from the business $50 for personal use.

8 Our bank discounts Byron King's note of $800 and credits our account with the proceeds. Date of note, April 15; time to run, 4 months; rate of discount, 6%.

9 H. M. Turner pays for bill of goods sold him February 28, less 21%, the bill amounting to $322.50.

10 H. F. Adams pays his note of $125 which we hold against him, and which is due today, with 90 days' interest at 6% added.

11 Loan $500 to H. G. Hill & Co., and take their note for 90 days as security.

12 Pay freight and cartage bills to date, amounting to $17.85.

13 The City National Bank discounts our 60-day note and credits our account with the proceeds.

Face of note, $200; rate of discount, 6%.

15 Buy, for investment, a house and lot on Fruit Street, paying $2000 for it.

15 Pay bookkeeper's salary for month, $80.

16 Buy mileage book for use by our traveling salesman for $20.

Exercise 5

(Follow instructions for Exercise 3)

July 1, 19

Balance, $2708.52.

2 E. W. Gray sends us a check for $240.10 to apply on his account.

3 Pay office rent for one month in advance, $150.

4 Buy Fox typewriter of Joseph Pickett for $100 cash.

5 J. E. Pender sends us a New York draft for $692.50 in full of his account.

6 We pay W. M. Collins for invoice of goods bought of him March 28, amounting to $1027, less 3%.

8 Pay last month's bills for advertising in daily papers, $87.25.

8 We hold a note against J. W. Arnold for $485, due to-day; they pay by check.

9 The Fourth National Bank discounts our 60-day note and credits our account for the

net proceeds. Face of note, $500; rate of discount, 6%.

10 We sold George E. Bryan an invoice of goods on the 1st inst., amounting to $185. He pays for the same to-day, less 2% allowed him for cash.

11 Pay telephone bill for March, $4.16.

12 Pay freight bills amounting to $72.85.

13 We pay our note for $200, held by Smith & Jones, which is due to-day.

13 We hold a 60-day note against C. W. Conant for $560, bearing interest at 6%, and due to-day. He pays the note and interest with a check.

15 F. B. Mason pays for the bill of goods we sold him March 30, amounting to $750, less 3%.

16 Pay clerks' wages to date, $75.

17 Buy five dollars' worth of stamped envelopes.

18 The First National Bank discounts H. F. Adams's note of $1320 to-day. Period of discount, 42 days; rate of discount, 6%.

OPENING ENTRIES

In opening a set of books, first make a complete statement of the resources and liabilities of the business. The resources will consist of cash in drawer and in bank, all forms of property in the possession of the business, such as merchandise, materials, furniture and fixtures, real estate, machinery and tools, etc., and all debts due the business either on personal accounts, generally spoken of as "Accounts Receivable," or on notes, called "Notes Receivable."

There should also be included under the resources any other items of indebtedness due the business, such as accrued interest on bills receivable, prepaid insurance, etc.

The liabilities of a business consist of all it owes. This indebtedness may be either on personal accounts, which are called "Accounts Payable," or on notes, known as "Notes Payable." There may also be other items of debt owing by the business, such as unpaid rent, accrued interest on Notes Payable, etc.

The difference between the sum of the resources and the sum of the liabilities represents the net investment, or net capital, of the business. This difference should be added to the list of the liabilities of the business, since it is the amount which the business owes to the proprietor or partners.

After this statement of resources and liabilities is completed, it is easily journalized by the following rule:

Debit the resources and credit the liabilities.

This rule will make a complete journal entry of any opening statement, since the resources and liabilities of every business are made equal by considering the net capital, or present worth, as a liability of the business. By this method, the opening statement of the resources and liabilities of any business is included in one journal entry.

If desired, however, a separate entry may be made for the resources and another one for the liabilities. In this case the rule would be:

Debit the resources and credit the proprietor for the total; credit the liabilities and debit the proprietor for the total.

The opening entry of a business is placed in the journal, the cash being included in this entry as a matter of convenience, and to show the complete investment in one entry. The cash investment is entered also in the cash book, but is checked off so that it will not be posted a second time to the credit of the proprietor or partners. In the journal the cash debit is checked off when the entry is made in the cash book.

Investment of Single Resource by Single Proprietor

This is the simplest kind of opening transaction. The form of the entry required has been shown in previous work. (See page 118.)

Investment of Several Resources by Single Proprietor

Make on journal paper the opening entries (journal and cash book) for the following: 1 Geo. W. Carter begins the Tea, Coffee, and Spice business this day with the following resources: Cash on hand and in bank, $385; mdse. as per inventory, $1250; store fixtures, $275; Jno. Harper owes on acct., $25.

The entry below illustrates the journal entry in a different form.

Do not neglect to check off the cash investment entry in both journal and cash book. 2 James Wooley begins business with the following resources: Cash in safe, $125; cash in bank, $3675; store building and lot, $5000; goods per inventory, $2500; Harry Altenau owes $140; Daniel Jenkins owes $320; note of Davis Bros. per B. B., $627.50; interest accrued on above note to date, $6.28.

3 E. M. Harrigan begins business with these resources: Cash in bank, $3750; mdse. as per inventory, $5378; office safe, $375; typewriter and other office furniture, $200; building and lot partially occupied by business, $7000. The following firms owe Harrigan on acct.: Harrison Loeb, $126; Fay & Eagan Co., $75.84; Jones Bros. Co., $186.75.

Investment of Resources and Liabilities by Single Proprietor

4 J. W. Jones has this day opened a Wood and Coal business at 125 W. Fifth St., with the following resources and liabilities:

Resources: Cash on hand and in bank, $675.50; mdse. as per inventory, $1672.25; horses and wagons valued at $570; S. M. Blue on account, $72.50; J. D. Simpson on account, $45.

Liabilities Due Jno. Solzer & Co., on acct, $395; due H. C. Bailey on 30-da. note, $500. The following illustrates the form of journal entry required.

5 V. C. Taylor commenced business with cash, $5000; real estate, $12,000; mdse., $8500; note for $1500 against J. Wilson, with accrued interest, $10.50; note for $600 against A. R. White, with interest accrued, $7.20; due from D. D. Jones on account, $175, and from J. C. Henry, $375. Taylor owes on a note to Carl D. Steiner, $460; interest accrued on this. note, $9; Taylor owes on account to Brown & Jones, $1265.50, and to Jacob J. Anstead, $324.75.

Opening Entries of Partnerships

6 Harry Peck and Joseph Long form a partnership under the firm name of Peck & Co., for the purpose of conducting the Furniture business. Peck invests cash $5000, and Long invests $3000.

Make the entry, debiting cash for the total amount of money invested, this being the resource at beginning, and crediting the partners for their respective investments.

7 John Shaler, Henry Desmond, and J. C. Cunningham have formed a partnership under the style of Shaler, Desmond & Co., to carry on the Dry Goods business. Their investments are as follows:

Shaler invests cash, $3000; stock of goods, $2000; sundry personal accounts due him amounting to $1500; and Henry Gorman's note, $500, with accrued interest, $5.

Desmond invests cash, $2000; store building and lot, $7000.