Rubber Trust.

Ex. 279. The National Rubber Trust was Incorporated in New York, January 1st, 1890, by the consolidation of The Ohio Rubber Co. of Cleveland, The New England Rubber Co. of Boston, The Goodrich Rubber Co. of Akron, The Keystone Rubber Co. of Philadelphia, The Metropolitan Rubber Co. of New York, and the Goodyear Rubber Co. of Providence. The Capital Stock is $10,000,000, 100,000 shares, par value $100; 40,000 shares, or $4,000,000, Preferred Stock; 60,000 shares, or $6,000,000, Common Stock.

The new company is to purchase all the property, machinery, material, etc., at an appraised value, and issue in payment full paid stock of the consolidated company. The liabilities and accounts due the old companies are to be liquidated by themselves. The total appraised value of the old companies is $6,000,000, as shown in the statement below, for which Common Stock was issued. The Preferred Stock was placed in the market for sale.

From the above statement and conditions what entries would you make to open the books of the Company, Trust or Combine?

$6,000,000.00

Treasury Stock.......... 4,000,000,00

Subscription.......

To Capital Stock...........

$6,000,000.00

"Preferred Capital Stock..... 4,000,000.00

Issue the stock to the stockholders, and credit each of them in the Stock Ledger. The stockholders in the Ohio company will receive 7000 shares, New England company 10,500 shares, Goodrich company 11,321 shares, Keystone 10,400 shares, Metropolitan 10,000 shares, and the Goodyear company 10,799 shares. In large corporations, where there are a great number of stockholders and shares are constantly changing hands, a "Transfer Clerk" is employed for that purpose only.

What entry is made to place the assets of the new company on the books?

Plant and Machinery, Ohio Co........

$543,035.00

In making an entry like the above, where property, etc., have changed hands, and where titles are to be made for the same, copy all Deeds, Mortgages, Contracts or Leases in full with each entry upon the Journal. This, of course, will consume a considerable amount of space and labor; but if accurately and properly done, much litigation may be saved in the future. Spare no time, space or labor when a full, clear record is necessary.

The above Journal entry would open the books of the new company, showing the appraised value of the assets from each of the old companies.

As to how the books of the new company are to be kept, much depends upon the general management. If each plant is to keep its own books, make its own collections, and pay its own bills, then the main office will charge each plant for the value of the assets in its possession, and proceed as heretofore. When the books are closed at the end of the year, each plant will be debited for the net gain or credited for the net loss, in the books in the main office. But if all the accounts are to be paid from the main office, the only work of keeping accounts by the different plants will be that of the customers, and when collections are made they are deposited and a draft sent to the main office for the full amount daily. Each plant will also have a bank account for expenses only, the money being received from the main office and paid by check and voucher. All the invoices are to be properly checked and vouched for, and recorded, but not in Double Entry form. The invoices are then sent to the main office, where they are entered to the credit of the proper parties and paid from the main office. The record of invoices kept by the different plants must agree with the accounts kept in the main office. A daily abstract of sales is sent to the main office. These reports are recorded and must agree with the final balance sheet which is sent promptly on the last day of each month. There is also a weekly recapitulation of receipts, expenditures, sales, etc., showing check and voucher number for payments, summary of sales, etc., which shall be proven in the main office at the end of the month, when all paid checks and vouchers are sent to headquarters.

If the books are kept in the main office, as just described, it is easily seen that the closing of the books would be done and the result unknown to the different plants; but as each plant is charged with the material at commencing, the bookkeeper could determine the Loss or Gain of his plant, because the vouchers and invoices will show the

expense of operating and the additional material purchased, although not charged to material account.

In the books at the main office each plant would be charged with all money sent it, all material, etc., purchased, and credited for all proceeds. The proper keeping of a set of books of a company doing so much business is simply a practical management of system and details, which should be the plainest, requiring the least amount of work, and showing the entire condition of the company at all times.

It will be noticed that the unsubscribed stock is Preferred Stock, the old stockholders taking the Common Stock in payment for their shares in the old companies. This will give the new company better opportunity to sell stock, and produce a larger capital, because Preferred Stock is easier to dispose of than Common Stock. Usually when all the Common Stock is taken by the incorporators, the company is capitalized for an amount that will pay say one and one-half shares of the new stock for one of the old, thereby receiving a benefit of increased stock.

Suppose the net gain for the year is $1,500,000, what entries should be made?

Loss and Gain......

To Surplus..........

$1,500,000.00

$1,500,000.00

The company declares a Dividend of 5% on the Preferred Stock and a general Dividend of 10% on the Preferred and Common Stock, and to pass $300,000 to Reserve Fund.

Surplus......

What entry?

$1,500,000.00

To Preferred Stock Dividend No. 1, 1891... $ 200,000.00

"Dividend No. 1, 1891.......

"Reserve Fund......

1,000,000.00

300,000.00

Enter the Dividends in the Dividend Book and pay them with vouchers, Debiting Dividend account and Crediting Cash.

Stock and Installments Forfeited.

Ex. 280. John Hardy subscribed for 10 shares of the Capital Stock of a Company at $100 per share and paid two 10 % installments.

Failing to pay the third installment, he forfeited his stock to the company and had credit for the installments paid. What entry, if Capital Stock received credit for full authorized capital?

Ex. 281. What entry if Stock and Installments were both forfeited?

Ex. 282. If the Capital Stock account was credited for Installments only, what entry?

A Brewing Company.

Ex. 283. The Cleveland Brewing Company was incorporated February 1, 1893, with a Capital Stock of $75,000, 750 shares par value $100. The entire stock was subscribed by ten different persons who paid cash in full.

Ex. 284. Show a Subscription Book properly filled out with names and subscriptions as you may choose, and give the opening entries.

Ex. 285. A net gain of $8000 was realized the first year. Declare a 5 per cent. dividend, pass the balance to surplus, give all entries to close, and show the Dividend Book properly filled, etc.