G. A. Baker subscribes for 100 shares, T. C. Pratt 65 shares, T. A. Jones 65 shares, D. R. Taylor 65 shares, Wm Britt 55 shares, I. R. McKay 50 shares, J. C. Trask 50 shares; the remaining 50 shares held as Treasury stock. Baker, Pratt, Jones, Taylor and Britt are to receive full paid stock for their subscriptions, which are paid out of the effects of the old firms. McKay and Trask pay their subscriptions with cash. What entry to consolidate, and open the books for the corporation?

The above entry combines the Assets and Liabilities of both firms, and opens the books for the new company with full authorized capital, Treasury Stock, etc. The books of the old firms should be closed as shown in the Eighth Lesson, page 63.

Branch Houses.

There are two methods of conducting the accounts with branch houses. The method to be adopted should depend largely upon the number of branches and the extent of the business.

First. If the branches are to buy their own goods, collect and pay their own accounts, then they must be debited for the Assets and credited for the Liabilities belonging to their respective plants.

We will suppose the corporate name of this company is the City Hardware Company, and that the old plant of Jones, Taylor & Co. shall be known as the East End branch. If this method is adopted, the East End branch would be debited and credited as follows:

The entries made on the books of the branch would, of course, be just the opposite from these, crediting the parent house for the Assets received, and debiting the parent house for the Liabilities assumed.

The above are the only entries required on the books at the main office until the end of the year. Then, if the branch has made a profit, the entry on their books would be:

Loss and Gain To Parent House.

On the books of the parent house the entry would be :-
East End To Loss and Gain.

If the branch has been operated at a loss, the entry on their books would be:

Parent House To Loss and Gain.

On the books of the parent house the entry would be:

Loss and Gain To East End.

If the parent house furnishes merchandise, cash, etc., during the year, the branches would be debited, and if the branches furnish merchandise or turn over cash to the parent house, they are credited. Some houses charge these goods at cost price, and others charge them at a profit.

Second. If the parent house is to buy all goods, pay all accounts, etc., then the branches will be charged only for the amount of goods in their possession when the books were opened, and for all goods sent to them thereafter. The account with the parent house would be the only liability account kept, which would represent their capital.

The branches would keep the accounts with their own customers, make their own collections, and turn the money in to the parent house. At the end of the year the proceedings for closing the books are the same as in any other business,-finally debiting the parent house for the net loss, or crediting the parent house for the net gain. The first method is the better one, and should be adopted. The methods of conducting the accounts with branch houses are very simple, and it is thought that further explanation would be useless.

A Manufacturing Company.

Ex. 305. Single Entry Stock Books changed to Double Entry and a Stock Dividend declared.

The Ohio Iron Company, Limited, was organized Jan. 1st, 1893, with a Capital Stock of $150,000, 1500 shares, par value $100. The Capital Stock paid up is $140,000, and is held by the following named parties J. C. Keim, 300 shares; C. C. Harris, 400 shares; P. C. Jones, 400 shares; J. A. Springer, 200 shares; H. A. Burgess, 100 shares; and 100 shares held as Treasury Stock.

Jan. 1, 1894, the company took an inventory, and decided to open the books and have them kept by Double Entry.

The following is a statement of the company's Assets and Liabilities: Mill and Furnace, $75,000; Pig Iron, $20,000; Accounts Payable, $41,000; Bills Receivable, $17,450; Machinery and Patterns, $31,000; Bills Payable, $10,000; Capital Stock, $150,000; Accounts Receivable, $77,550.

Ex. 306. What is the gain or loss?

Ex. 307. What entry to open the new books by Double Entry? Ex. 308. Declare a Dividend equal to the amount of Treasury Stock, and issue the same to the shareholders in proportion to the amount of stock held by each, and pass the balance of the net gain to Reserve Fund.

CHAPTER TWENTY-TWO.

Corporation Law.

Illegal Incorporation.

Ex. 309. A corporation cannot be formed legally unless authorized by the Legislature. The Legislature of a State has no power to constitute a person a member of a private corporation without his consent, nor can the Legislature compel a subscriber for shares in at proposed corporation to accept shares in a different corporation from that for which the subscription was made. It is also a settled fact that a State cannot alter the contract between the shareholders by legislative enactment.

Shareholders in a corporation cannot by their ratification render legal the illegality of forming a corporation without complying with the statutory prerequisites.

If a charter or general incorporation law prescribes certain formalities to be complied with by the persons wishing to form a corporation under it, the due performance of the formalities must be complied with. No authority to form a corporation from a charter or law of nature can be obtained until they have been complied with.

A subscription to the capital stock of a company about to be formed under a charter or general law does not constitute the subscriber a shareholder until all conditions p ecedent to the legal incorporation of the company have been fulfilled.

Construction of Charters.

The charter of a corporation serves a two-fold purpose: It operates as a law conferring upon the corporators the right of franchise to act in a corporate capacity; and, furthermore, it contains the terms of the fundamental agreement between the corporators themselves. Corporations are usually formed by the adoption of articles of associa tion and the subscription of capital, in pursuance of general incorporation laws. The articles of association of a company thus organized, taken in connection with the laws under which the organization takes place, form the constitution of the association and answer the same

purposes as a special charter. They contain the terms of the agreement of association between the shareholders, and indicate the character and extent of the business in which the company shall engage. Authority to enter into a contract which is in violation of an express prohibition of the charter of a corporation, or a general rule of law, can never be implied.

A corporation has implied authority, in the absence of a prohibition in its charter, to acquire and hold any property, whether real or personal, which may be required in carrying on the business for which the company was formed. A corporation may acquire and hold whatever property may be reasonably useful and convenient in attaining its legitimate ends. A corporation may dispose of any or all of its property (unless expressly restrained by law), in the same manner as an individual.

Corporations, like co-partnerships, transact their business and are known to the world under particular names. A corporation may sue and be sued as an entity, under the name by which it is known in its charter.

Alteration of Charter.

The charter of a private corporation cannot be altered without the consent of the Legislature, nor without the consent of every member of the corporation. That such consent cannot be implied, seems selfevident. A grant, by the Legislature, of permission to act in a corporate capacity for a specified purpose, does not impliedly authorize the grantees to assume corporate powers for any other purpose. Nor do the stockholders of a corporation, when they unite to do business under a particular charter, impliedly agree to become parties to a different charter.

Corporations cannot effect a consolidation without the unanimous consent of the members of each company, and such consent cannot be inferred as an implied condition of their charter or articles of association.

Charters of incorporation are frequently granted subject to a reservation of power in the Legislature "to repeal, alter, or suspend them at pleasure. A charter thus granted may be repealed or modified by the Legislature at any time, against the will of every member of the company.

By-Laws.

It is implied in the charter of every private corporation formed for the pecuniary profit of its members, that the majority shall have