erty account in respect thereof? On what basis would you personally recommend that the charges should be made? Give your reasons. 8. (a) How would you deal in the balance sheet of a corporation with shares recovered from a vendor to whom they had been issued as fully paid and who had returned them in settlement of a claim for fraudulent misrepresentation in respect of the property sold by him to the corporation? (b) How would you deal with these shares for the purposes of a dividend? AMERICAN INSTITUTE OF ACCOUNTANTS BOARD OF EXAMINERS Examination for Admission as Associate Accounting Theory and Practice-Part I JUNE 15, 1917, 9 A. M. TO 12.30 P. M. Candidates are required to answer questions one and two and one of the remaining three questions, but no more. 1. The firm of A and B have the following statement: C is admitted as a special partner with the following arrange ment: C to contribute $30,000 and to be entitled to one-third of the profit for one year. Before making the contribution the following changes to be made in the books: store to be marked down 5 per cent; allowance for doubtful accounts to be created amounting to 2 per cent; merchandise to be revalued at $35,000; furniture and fixtures to be valued at $2,500. At the end the amount of goodwill is to be fixed at 3 times the net profits for the year in excess of $20,000, this goodwill to be set up on the books, the corresponding credit being to A and B equally-A, B and C each to draw $3,000 in cash, the remaining profits to be carried to their capital accounts. Accounts payable paid (face $245,000, discount 2 per cent) ....... .... 240,100 Accounts receivable collected (face $170,000, all net except $50,000 on which 2 per cent allowed)....... Buying expenses, paid cash.... 169,000 1,500 Selling expenses, paid cash.. Delivery expenses, paid cash.. Management expenses, paid cash. Miscellaneous expenses, paid cash.. Interest on notes payable, paid cash...... Partners each withdrew $3,000 cash as agreed. In closing the books for determining profits and goodwill the following were agreed upon: 21,000 9,000 4,500 3,000 250 2. Goodwill having been estimated and duly entered C then contributes enough cash so that his capital account equals just one-third of the total capital. Prepare statements showing how the accounts are to be adjusted and the balance sheet after the final adjustment. AB, whose balance sheet appears above, having been unfortunate in business, goes into liquidation. Prepare statement of affairs and deficiency account. The real estate is valued at $90,000, the equipment at $30,000. The patents are considered worthless, with the exception of one thought to have a market value of $5,000. Bonds, with a par value of $27,500, were pledged to secure a collateral loan of $25,000. These have, however, shrunk in value so as to be worth at present prices only $22,000. Included in investments are $5,000 other bonds which are clearly worthless; the other investments have a doubtful value of 50 per cent. The notes receivable are thought to be good. Of the accounts receivable $10,000 are known to be good, $5,000 are known to be bad, and the remainder are expected to pay 80 per cent. The inventories are estimated as worth not more than half of their book value. Goodwill is purely fictitious. Interest accrued on the mortgage is $800, on notes payable, $523. Wages accrued are $1,200. Assuming the foregoing estimates of value are correct and the expenses of liquidation amount to $3,000, what percentage of their claims will the general creditors receive? 3. A company organized with $1,000,000 capital stock which it placed at par, and $1,000,000 5 per cent bonds which it sold at 90, this being a 6 per cent basis. It paid to contractors, etc., for construction $1,800,000 and this amount of investment ran, on the average, for one year before the property was ready for operation. When operation began the company had therefore paid one year's interest on the issue of bonds. No dividends were paid on the stock. In addition to the sum named above the company also paid $10,000 for legal expenses in connection with incorporation and $5,000 for franchise and other fees. How should the accounts appear when the property was ready for operation? 4. A corporation having issued its capital stock at par buys 1,000 shares at 95. It later sells 500 of these shares at 98, and 300 at 85, and 200 at 101. Give the journal entries covering these transactions. How should the items appear on the balance sheet immediately after purchasing the stock, and immediately after each of the sales? 5. The following items represent the combined statement of all the national banks. Rearrange them in the form of a balance sheet. You need not follow the form used by the Comptroller of the Currency, but make a balance sheet in the form that seems the most desirable. Banking house, furniture and fixtures. Bills payable...... Bonds borrowed Bonds, securities, etc. Capital stock paid in. $160,800. 31,200. 44,700. 60,000. 700,300. 896,400. Bonds (other than U. S.) to secure U. S. deposits... 68,200. |