$25 The City of Cleveland The City of Cleveland $25 will pay the bearer at will pay the bearer at the American Exchange Nat. Bank in the City of New York on the first day of April, 1895, Twenty-five Dollars, interest due on Bridge Repair Bond. W. W. Armstrong, Treas $25 the American Exchange Nat. The City of Cleveland The City of Cleveland $25 will pay the bearer at will pay the bearer at the American Exchange Nat. Bank in the City of New York on the first day of October, '93, Twenty-five Dollars, interest due on Bridge Repair Bond. W. W. Armstrong. Treas the American Exchange Nat. W. W. Armstrong, Treas CHAPTER TWENTY-ONE. Partnership Adjustment, Consolidation, Stock Company Incorporated, Branch Houses, Etc. Ex. 304. G. A. Baker, T. C. Pratt, and A. M. Thomas have been conducting a retail hardware business as partners, under the firm name of Baker, Pratt & Co. August 21, 1893, A. M. Thomas notifies the other partners that he will retire. Baker and Pratt will then consolidate with Jones, Taylor & Co., whose store will be conducted as a branch. The following is the Trial Balance of Baker, Pratt & Co., Aug. 21, '93, and is given for adjustment under the following conditions: In the articles of co-partnership the new firm is to be allowed on all balances due on personal accounts a discount of 5%, and a discount of 2% on all notes due the firm. The accounts have all been averaged and their maturities given as shown in the Trial Balance. Interest is to be computed on all items due either to or by the firm.. Points shown: Balance due Thomas, entries to consolidate, entries to incorporate, entries to conduct branch houses, etc. Trial Balance of Baker, Pratt & Co., Aug. 21, 1893. Note.-First adjust the interest on the partners' accounts, then determine the amount of interest to be allowed to or by the firm on the notes that are not due at the date of settlement; then ascertain amount of interest in favor of or against the firm on all personal debits or credits, by computing the interest in all cases from the date of settlement to the date of maturity of the item, whether it be earlier or later than the date of settlement. After finding whether the balance is in favor of the old or new firm, and making the entry to adjust the accounts regarding the losses on notes and personal accounts due the firm, we are prepared to determine the partners' balances for settlement Aug. 21. The first step is to find the interest due to or from the members of the firm, as shown below: : Interest to Pratt's credit on $8000 invested 201 days.......................... $268.00 debit on $2000 withdrawn 142 days........ 47.33 Leaving a balance to Pratt's credit...... $220.67 Interest to Baker's credit on $5600 invested 173 days......... $161.47 4.95 Making the total to Baker's credit....... $166.42 Note. The amount withdrawn by Baker does not average until after the date of settlement; therefore, he is entitled to a for the interest thereon. due credit Interest to Thomas' credit on $5000 invested 112 days........ debit on $1500 withdrawn 81 days..... Leaving a balance to Thomas' credit......... To adjust the interest between the partners, make the following $93.33 20.25 $73.08 The amount of Thomas' debit is the difference between his credit of interest and one-third of the total credit of interest. The next step is to determine the amount of Interest in Favor of the Firm. Note. The credit of this entry is not to be posted until after the debit has been first posted and the old account closed up. Next determine the discounts allowed to the new firm on the Bills Receivable, and balances of the personal accounts as per contract and as shown below:: Total deduction for bad or doubtful debts............ $551.50 Next open an account with Contingencies, which is to be credited with the amount of this discount, that is made to reduce the above accounts to a cash valuation, and make the following Journal entry :— Loss and Gain......... To Contingencies.... $551.50 $551.50 Note.-The Contingency account is in no sense a debt or obligation of the firm; it is merely an offset against the nominal value of the assets, with a view of reducing them to their estimated cash valuation. The accounts may now be closed and the balances brought forward, when the Ledger will show the following balances : The balance due A. M. Thomas is $5861.11, which is paid to him in cash, leaving the Assets and Liabilities of the new firm as follows: Baker and Pratt consolidate with Jones, Taylor & Co., to incorporate into a Joint Stock Company, with a Capital Stock of $50,000, consisting of 500 shares, par value $100 each: The Assets and Liabilities of Jones, Taylor & Co. are as follows: |