Greendlinger, Leo

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Journal of Accountancy Volume 6 Issue 3 Article 13 7-1908 C. P. A. Question Department Leo Greendlinger Follow this and additional works at: https://egrove.olemiss.edu/jofa  Part of the Accounting Commons Recommended Citation Greendlinger, Leo (1908) "C. P. A. Question Department," Journal of Accountancy: Vol. 6: Iss. 3, Article 13. Available at: https://egrove.olemiss.edu/jofa/vol6/iss3/13 This Article is brought to you for free and open access by the Archival Digital Accounting Collection at eGrove. It has been accepted for inclusion in Journal of Accountancy by an authorized editor of eGrove. For more information, please contact egrove@olemiss.edu. C. P. A. Question Department.Conducted by Leo Greendlinger, M. C. S.Criticism and exchange of ideas will clear many a doubt and at the same time improve shortcomings. To solve, compare, and criticise C. P. A. problems, and thereby to aid in bringing about a uniform American standard for C. P. A. examinations, is the object of this department. With the aid of suggestions and criticism from the professional brethren, it can undoubtedly be achieved. Inquiries will be cheerfully answered.The following are two representative problems set by The Society of Accountants and Auditors in London, England, at the Final Examinations, held June 4 and December 4, 1907, respectively, under the headings, “Advanced Bookkeeping and General Commercial Knowledge,” and “The Adjustment of Partnership and Executorship Accounts,” with solutions.QUESTION 1.(June 4, 1907.)The following figures are taken from the books of the A. B. Mills as at December 31, 1906. You are requested to prepare from them a Trial Balance, a Manufacturing Account, a Trading Account, and a Profit and Loss Account, showing the cost of manufacture. Prepare also a Balance Sheet. The period is one year.Yarn (used).................................................................. $25,000Sales............................................................................ 81,250Wages.......................................................................... 22,500Discounts received.................................................... 2,500Dyeing.......................................................................... 12,500Power, Light and Heat............................................ 3,125Boxes and Cases.......................................................... 1,250Repairs........................................................................ 685Sundry Expenses (Mills)............................................ 1,060Insurance.................................................................... 155Salaries........................................................................ 2,500Taxes............................................................................ 310Depreciation................................................................ 425Advertising.................................................................. 1,250Traveling Expenses................................................... 1,125Returns........................................................................ 1,000Commissions................................................................ 1,875Discounts Allowed...................................................... 440Interest on Loans...................................................... 410Cash at Bank and in hand........................................ 14,065Bills Payable............................................................... 37,500Sundry Debtors.......................................................... 22,500Sundry Creditors........................................................ 6,250Fixtures, Fittings, Office.......................................... 4,750Capital.......................................................................... 93,750Machinery and Plant.................................................. 65,925Bills Receivable.......................................................... 38,400220C. P. A: Question Department.QUESTION 2.(December 4, 1907.)Diogenes Brown and Eusebius Robinson, having separate businesses, agree to a joint venture in a cargo of goods to a newly-established Colony, under the following arrangement:Each supplies $5,000 of his own goods, beside which they jointly purchase $10,000 (net) from other parties. This latter sum is paid by E. R., who receives all the goods into his own warehouse, packs them, puts them on board ship, and pays all the necessary outgoings. For this he makes a charge of $50, and is entitled to interest at 5 per cent. per annum for Cash-out-of-pocket, until the realization. The out-of-pocket expenses are: Freight and Charges, $175; Insurance, $125; and Packing Cases, $35. The goods are sold upon arrival for $25,000 and at the end of three months from the start of the transaction a remittance, less charges for Landing, Warehousing, Sale Charges and Commissions, etc., $412.75, is received by E. R. Journalize these transactions, and raise proper Joint Adventure Accounts in the books of both parties, showing the profit made, which is to be equally divided.SOLUTION 1.TRIAL BALANCE OF THE A. B. MILLS, DECEMBER 31, 1906.Cash at Bank and in hand Bills Receivable.............. Machinery and Plant.... Fixtures, etc....................Yarn (used).....................Sales................................Wages...............................Discounts received........  Dyeing.............................. Power, Light and Heat.. Boxes and Cases.............  Repairs............................. Sundry Expense (Mills) . Insurance........................ Salaries............................ Taxes................................  Depreciation.................... Advertising...................... Traveling Expenses........Returns............................Commissions....................Discounts Allowed........ Interest on Loans.......... Bills Payable.................. Sundry Creditors...........  Sundry Debtors.............Capital..............................$2,813.007,680.0013,185.00950.005,000.004,500.002,500.00625.00250.00 137.00 212.0031.00 500.006.2.0085.00250.00225.00 200.00 375.0088.0082.004,500.00$16,250.00500.00$7,500.001,250.0018,750.00$44,250.00 $44,250.00221The Journal of Accountancy.222MANUFACTURING ACCOUNT OF THE A. B. MILLS, FOR THE PERIOD ENDING DECEMBER 31, 1906.$12,974 00$12,974 00$16,050 00 $16,050 00By Cost of Production..By Sales.............................................$16,250Less Returns............................... 200TRADING ACCOUNT.To Yarn (used)............................ .  $5,000Wages......................................  4,500  Dyeing.......................................... 2,500  --------- $12,000 00 Power, Light and Heat....:... $625Repairs......................................... 137Sundry Expenses........................ 212 974 00$12,974 00 To Cost of Production...................................... $12,974 00Salaries.............................................$5°°Advertising...................................... 250Traveling Expenses....................... 225Boxes and Cases............................ 250Commissions.................................... 3 7 5 1,600 00Gross Profit.................................................. 1,476 00$16,050 00C. P. A. Question Department.223PROFIT AND LOSS ACCOUNT.By Gross Profit.........................   $1,476 00 $1,476 00By Net Profit on Trading................................ $1,298 00Discount Received...................................... 500 00 $1,798 00Liabilities.By Bills Payable.................................$7,500Accounts Payable....................... 1,250--------- $8,750 00Capital:Original...................................$18,750  Net Profit (Surplus)........... 1,628  20,378 00$29,128 00BALANCE SHEET OF THE A. B. MILLS, DECEMBER 31, 1906.To Insurance............................................$31  Taxes.................................................. 62  Depreciation....................................... 85  ----   $178 00Net Profit on Trading..................................j 1,298 00$1,476 00To Discount Allowed..........................................I $88 00Interest on Loans........................................; 82 00Net Profit (Surplus)....................................  1,628 00      —   $1,798 00Assets.To Cash.............................................................. $2,813 00Bills Receivable............................$7,680Accounts Receivable.................. 4,500  --------- 12,180 00Fixtures, etc................................................ 95° 00Machinery and Plant.................................. 13,185 00' $29,128 00The Journal of Accountancy.SOLUTION 2.(Journal of Eusebius Robinson.)Joint Adventure to........................................$20,385.00For total cost of a cargo of goods shipped to ------------onjoint account of myself and Diogenes Brown.To Merchandise (Sales)..........For a lots of goods which we supplied.Diogenes Brown................For a lot of goods sup- lied by him.Cash................................For additional purchases (paid by me $10,000) and charges on the shipment, viz.: Freight, etc., $175; Insurance, $125; and Packing Cases, $35.$5,000.00$5,000.0010,335.00Commission............................ 50.00For handling the ship­ment.Cash.....................................................................  $34,587.75Net proceeds received this day for our joint adventure with D. B.To Joint Adventure to.......... $24,587.75 Proceeds of sale of our shipment in Co. with D.Brown.Joint Adventure to........................................ $127.19For interest charges on money advanced.To Interest Gained................. 127.195% on $10,335 advanced on Joint Adventure for three months.Joint Adventure to........................................ $4,075.56For profit made on the venture in Co. with D. B.To Diogenes Brown................ 2,037.78For his one-half share in the profits.Profit and Loss Account .. 2,037.78For my share in the profits.224C. P. A. Question Department.EUSEBIUS ROBINSON’S LEDGER. Joint Adventure toCr.By Proceeds of Sales.......................................... $24,587.75 $24.587.75 Cr.MERCHANDISE (Sales).By Joint Adventure to..................................... $5,000.00Cr.CASH. By Purchases for Joint Adventure....................$10,000.00Freight, Insurance, etc................................ 335-°° Cr.DIOGENES BROWN.By Mdse. contribution............ ........................ $5,000.00One-half share of profits.............................. 2,037.78To first cost of Adventure................................ $20,385.00Interest on Advances.................................. 127.19D. Brown’s share of profit.......................... 2,037.78Profit and Loss, my share of profit............ 2,037.78$24,587.75Dr. To Joint Adventure to . . . proceeds... $24,587.75Dr. Dr. Dr.225The Journal of Accountancy.Dr. COMMISSION. Cr.  By Joint Adventure to...................................... $50.00Dr. INTEREST. Cr.By Joint Adventure to...................................... $127.19Dr. PROFIT AND LOSS. Cr.By Joint Adventure to...................................... $2,037.78226C. P. A. Question Department.D. BROWN’S LEDGER. JOINT ADVENTURE TOCr.Dr.To prime cost of my share in the venture........ $5,000.00 By my share of net proceeds in the venture . . $7,037.78Profit and Loss.............................................. 2,037.78$7,037.78 $7,037.78Dr. MERCHANDISE (Sales). Cr.By Joint Adventure to..............    $5,000.00Dr. E. ROBINSON. Cr.To Joint Adventure to one-half of my share in proceeds............................................ $7,037.78Dr. PROFIT AND LOSS ACCOUNT. Cr.By Joint Adventure to................... ........... $2,037.78227The Journal of Accountancy.JOURNAL OF DIOGENES BROWN.Joint Adventure to........................................ $5,000.00For my share of prime cost inCo. with E. Robinson, who manages the adventure.To Merchandise (Sales).......... $5,000.00 For goods contributed by me.E. Robinson...................................................... $7,037.78For net proceeds of sale as per account of sales rendered.To Joint Adventure to.......... 7,037.78Representing my original share of prime cost— $5,000, and one-half share of profits.COMMENTS.In presenting the above problems the monetary system was changed in order to render the solution more easily comprehensive by American readers.As pointed out in last month’s Journal, the problems in the Final Examination are gotten up in the same haphazard style as the problems of the Intermediate Examination. If the examination is supposed to be in Practical Accounting the questions, surely, ought to be practical. The first question, while rather a good test problem, is lacking the finishing touch which would make it as though it were taken from actual practice. There is no item of rent included, which is rather strange. Whether the Mill owns Real Estate or not, there surely ought to be a charge for rental.Another unpractical arrangement we can observe in the item "yarn (used)”. The question begins: “The following figures are taken from the books of the A. B. Mills, etc.,” and the first item is certainly not shown directly on the books, but arrived at after taking into consideration various elements, such as Purchases, Returns, Inventory, etc. It would be better to give all the accounts that result in the figures, showing how much yarn was used. For the preparation of a Balance Sheet, as required in the problem, we necessarily desire to know the inventory of goods on hand. A going concern, such as this is supposed to be, surely has some stock on hand.There are no comments to be made regarding the make up of the second problem. What attracts our particular attention in the make up of the paper of this examination is, that the problems are of a general character, as they should be, and not very specialized.The accounts in the Trial Balance are arranged in the following order: Real, Nominal, Personal, and Capital. The respective debits or credits of each of the accounts was arrived at by an analysis of the nature of each account.Proper division of the nominal accounts into the various sections of the Profit and Loss Account was made, with the exception of Insurance, Taxes, and Depreciation, which were not charged to Manufacturing, but to the Profit and Loss section. The wording of the problem is not clear enough for an apportionment of these items, hence they are shown as of a general nature.In solving the second problem it was inferred from the phrasing of the question that Eusebius Robinson was the manager of the adventure hence the reason why a full record of the adventure is kept in his books, from the time of shipment until the final remittance is received, while such is not the case in Brown’s books.The time that the Society allowed for answering six questions, the above two being representatives, was three hours. No matter how much knowledge an accountant may possess, and no matter how ex­perienced he may be, he cannot, if his answers are to have any form or style, solve the above problems in one hour. It is time for examining bodies to recognize the unfairness to candidates in allowing so little time228

C. P. A. Question Department

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C. P. A. Question Department

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