Cunningham's investment consists of cash, $1500, and 50 shares of Pa. R. R. stock at the market value of $120 per share.

Make one entry for the entire opening transaction, debiting resources and crediting liabilities. The only liabilities in this case are to the three partners for the amount of their investments. Debit Accounts Receivable for the total of personal accounts due.

8 Thomas Bender and J. B. Potter have this day formed a partnership and will hereafter conduct their respective businesses as one business under the style of Bender & Potter. Bender's statement of resources and liabilities is as follows:

Resources: Cash on hand, $1000; stock of groceries, $1125; outstanding accounts, $395; store and office fixtures, $890; office furniture, $250.

Liabilities Due sundry creditors on account, $500; notes outstanding, $750.

Potter's statement is as follows:

Resources: Cash, $1500; stock of coffee, tea, and spices, $2000; store lot and building, $6000; rent due on part of storeroom, $200.

Liabilities Due creditors on account, $1500; mortgage on store building, $3000.

Make entry for the opening statement of the new firm. Credit Accounts Payable for the total due creditors. Credit Mortgages Payable for the mortgage.

WHOLESALE CARPET BUSINESS

In the following exercise, a journal, a cash book, a sales book, and a purchases book will be used.

In addition, a stock book will be used in the exercise, by means of which book the quantity of goods on hand from day to day may be readily determined. This is often spoken of as a perpetual inventory, a book inventory, or a going inventory, as contrasted with a physical inventory, which consists in taking stock of goods on hand at a certain time.

The advantages of a perpetual inventory are:

(a) The amount of goods in stock is known at any time.

(b) It enables the purchasing agent to anticipate purchases in order that sufficient stock may be carried at all times.

(c) It detects loss by theft or by waste.

The following illustrates a simple form of such a book. The student may use ledger paper to good advantage in designing the book, as the account kept with each class of merchandise dealt in is handled according to the principles of a ledger account, being debited with the quantity bought and credited with the quantity sold.

No explanation should be necessary regarding the use of the book.

In practice, a loose leaf or a card system, instead of a bound book, is usually adapted for stock records.

In writing up the following exercise, the student is expected to rely wholly upon his knowledge of the subject as obtained from former exercises. The work is not to be submitted for examination until the exercise is entirely completed. Selling price lists will be assigned by

the instructor, from the schedule on page 144.

The work should be done in the following order:

(1) Make all entries required.

(2) Close the cash book, the purchases book, and the sales book.

(3) Post.

(4) Take a trial balance.

(5) Take an inventory of the goods on hand as shown by the stock book, reckoning the

value of the stock at cost prices.

(6) Prepare a Profit and Loss Statement and a Balance Sheet.

(7) Make the closing entries, post them, and rule the ledger accounts. (8) Pass in the exercise for correction.

Transactions

June 1 Commenced the Wholesale Carpet business, at No. 182 Elm Street, investing cash, $5500.

1 Paid $250 for office furniture.

2 Bought of John H. Pray & Co., Boston, net 30, 2/10, 600 yd. moquette, 750 yd. body Brussels, 1200 yd. ingrain, 1200 yd. matting, 2500 yd. lining.

3 Bought of Barton & Bros., Philadelphia, 1220 yd. linoleum, 1429 yd. oilcloth, note at 15 days with interest being issued in payment.

4 Sold E. B. Alling & Co., for cash, less 3%, 125 yd. moquette, 150 yd. body Brussels, 300 yd. lining. You may number the sales, beginning with No. 100.

4 Sold F. H. Walling & Co., net 30, 2/10, 200 yd. ingrain, 400 yd. matting, 600 yd. lining. 4 Sold J. G. Carter & Co., 400 yd. moquette, 450 yd. body Brussels, 850 yd. lining, taking their note at four months in payment.

5 Sold E. H. Smith & Co., 75 yd. moquette, 150 yd. body Brussels, 600 yd. linoleum, 429 yd. oilcloth, obtaining their 30-day acceptance in payment.

5 Discounted J. G. Carter & Co.'s note of June 4 at the City Bank.

5 Bought of John H. Pray & Co., Boston, net 30, 2/10, 950 yd. moquette, 892 yd. body Brussels, 2200 yd. lining.

5 Paid freight and drayage on merchandise, $32.10; rent for month of June, $75; books and stationery, $22.50.

5 Bought of James Smith & Co., New York, 400 yd. Axminster, 525 yd. velvet, 984 yd. tapestry Brussels, 2000 yd. lining, accepting a 10-day draft in payment.

7 Paid James Smith & Co.'s draft of June 5, at 10 days from date, for $2252.88, less discount for the unexpired time.

7 Sold Reed & Savage, subject to sight draft, less 3%, 145 yd. Axminster, 220 yd. velvet, 484 yd. tapestry Brussels.

8 Drew a sight draft on Reed & Savage, for the amount of invoice sold them June 7, less 3%, and had the draft placed to your credit in the City Bank.

8 Sold Knowles & Johnson, on account, net 30, 2/10, 300 yd. moquette, 392 yd. body Brussels, 400 yd. ingrain, 1200 yd. lining.

9 Paid the invoice of J. H. Pray & Co., received June 2, $2768.75, less 2%

10 F. H. Walling & Co. paid their bill of June 4, less 2%.

11 Discounted E. H. Smith & Co.'s acceptance of June 5, at the City Bank.

12 Sold F. H. Walling & Co., on their note at 4 mo., with interest, 600 yd. ingrain, 475 yd. matting, 1200 yd. lining. Allowed them the cash discount of 3%.

14 Bought of John & James Dobson, Philadelphia, net 30, 2/10, 892 yd. body Brussels, 1225 yd. tapestry Brussels.

14 Bought of Barton Bros., Philadelphia, net 4 mo., 8/15, 1500 yd. linoleum, 1400 yd. oilcloth.

15 Knowles & Johnson sent you, to apply on account, T. H. Sullivan's note in their favor, dated Denver, Colo., May 24, 19, at 90 days, for $742.28, with interest. Allowed Knowles & Johnson credit for the face of the note and the interest accrued upon it to date.

15 Paid John H. Pray & Co. invoice of June 5, less 2%.

16 Discounted the Sullivan note, received of Knowles & Johnson, at the City Bank. (This is an interest-bearing note.)

16 Sold J. G. Carter & Co., on acct., net 60, 2/10, 600 yd. linoleum, 480 yd. oilcloth. 17 Drew for private use, $150.

17 Paid clerks, $75.

18 Sold E. H. Smith & Co., 212 yd. Axminster, 305 yd. velvet, 250 yd. tapestry Brussels, obtaining their acceptance at 30 days in payment.

18 Knowles & Johnson paid the balance due on their bill of June 8, less 2% of the entire bill. 18 Paid note (dated June 3) and interest favor of Barton Bros. due this day.

21 Sold E. B. Alling & Co., net 30, 2/10, 420 yd. moquette, 280 yd. body Brussels, 800 yd. lining.

21 Discounted F. H. Walling & Co.'s note of June 12 at the bank.

22 Bought of John H. Pray & Co., Boston, net 60, 3/10, 897 yd. moquette, 1745 yd. ingrain, 2400 yd. lining.

23 Bought of James Smith & Co., New York, subject to sight draft in 10 days, 722 yd. Axminster, 941 yd. velvet.

23 Paid John & James Dobson's invoice of June 14, less discount.

24 Sold Reed & Savage, 400 yd. moquette, 712 yd. body Brussels, 1200 yd. lining, taking their acceptance at 10 days in payment, less 2% discount on the bill.

25 Bought of John & James Dobson, Philadelphia, 1892 yd. body Brussels, 671 yd. moquette, 3200 yd. matting. Gave in part payment your note at 4 mo. for one-half of the amount of the invoice; the balance on account, 4 mo.

26 Sold Knowles & Johnson, net 4 mo. 2/15, 920 yd. linoleum, 1220 yd. oilcloth, 43 yd. Axminster.

28 Sold F. H. Walling & Co., net 30, 2/10, 698 yd. moquette, 792 yd. body Brussels, 1500 yd. lining.

28 Sold E. B. Alling & Co., net 30, 2/10, 390 yd. moquette, 822 yd. body Brussels, 975 yd. tapestry Brussels.

29 Paid Barton Bros.' invoice of June 14, less 8%.

30 E. B. Alling & Co. desired to take advantage of 2% discount on their purchase of June 21, but being short of money, they sent $1000 to apply on account, with the understanding that they are to be allowed the discount on so much of the bill as this amount will pay for. 30 Paid clerks, $75. Paid freight bills to date, $68.92.

Make, with sufficient explanations, the proper entries for the following transactions, using at least two books of original entry (double entry journal and cash book): (40 points) 1 Oct. 11, 19 F. A. Cross, Detroit, Mich., starts a business venture with a cash investment of $500 on deposit in The Valley Trust Co.

11 Mr. Cross purchases from The Amsterdam Carpet Co., New York, a stock of carpets and rugs for $5000. The terms of payment are: cash down, $250; two notes, each for $1500, one for 30 days and one for 60 days; balance in two equal installments payable respectively on November 1 and December 1.

15 Paid freight bill on The Amsterdam Carpet Co. shipment from New York, $35.17.

16 Paid $18.75 premium for $5000 insurance on stock of goods.

23 Sold Henry Fair, Flint, Mich., on account, carpets amounting to $562.80.

26 Sold Daniels & Carr, City, for cash, rugs amounting to $210.40.

28 Sold Watson Jones, Ann Arbor, Mich., terms 2/15, a lot of carpets and rugs amounting to $1582.45.

30 Received from Henry Fair, in part payment of bill of Oct. 23, a check for $62.80 and a two months' note for $250, dated Oct. 29.

Nov. 1 Offered at The Valley Trust Co. for discount and credit, Henry Fair's note of Oct. 29 and our own 15-day note for $500, dated to-day, with Benjamin Olcott as accommodation indorser. The Valley Trust Co. credited our account with the proceeds of the two notes. 1 Paid by check the installment due The Amsterdam Carpet Co. to-day.

4 Sold at public auction carpets and rugs amounting to $842.35. With the exception of one rug sold for $150 to Mrs. J. L. Whitcomb, all the sales were made for cash.

10 Paid note due to-day in favor of The Amsterdam Carpet Co.

12 Received from Watson Jones check for bill of Oct. 28, less the discount. 16 Gave The Valley Trust Co. check for note due to-day.

20 Paid a number of expense bills amounting to $35.28.

25 Mr. Cross takes for his own use a rug valued at $85.

30 Received check from Henry Fair for the balance of his account.

30 In response to our letter of Nov. 27, The Amsterdam Carpet Co. writes in part as follows: "If you find it impossible to make the payment due Dec. 1, we shall be glad to take your 10-day note covering both the amount of the installment and the interest at 5%." We accept the proposition and send the note accordingly.

Balance the cash book and bring down the balance for Dec. 1.

2 On Dec. 31, 19, the books and records of C. M. Sumner, a local merchant, give the following information concerning his business for the year just ended:

Merchandise on hand at the beginning of the year was valued at $3245.10; purchases for the year amounted to $5849.25; receipted freight bills show that $585 was paid for freight on goods purchased during the year; sales for the year amounted to $7248.95; merchandise on hand on Dec. 31, 19-, is inventoried at $5215.40; furniture and fixtures have depreciated 10% on a value of $600; the interest account shows a debit balance of $48.50; expense items amounting to $215 were paid during the year; the cash book shows that $106.28 discount was received in the settlement of invoices of merchandise purchased.