CHAPTER TWELVE.

Ex. 258.

An Oil Company.

Samuel Warden is the owner of a piece of land on which he has found oil. Geo. Boyd, Amos Trout, Jos. Steele, A. Ruff, and M. Rumbaugh agree to pay him $25,000 to donate the land for the purpose of incorporating a Joint Stock Company. Warden is to receive full paid stock for his full right and title in the land. The other incorporators are to subscribe for same amount of stock donated to Warden, and are to pay 25% cash down and the balance of their subscriptions in equal installments every 60 days. Capital Stock $200,000, 2000 shares, par value $100. The remaining shares to be sold for operating purposes. What entry?

The Subscription account is debited for the subscriptions of Boyd, Trout, Steele, Ruff, and Rumbaugh. Warden having paid for his stock by donating the land, Debit Land account for the appraised value, Debit Treasury stock for amount of stock held by the Treasurer, and Credit Capital Stock and Working Capital. If the first installment of 25% has been paid, this entry can be used:

Any other name could be given the Plant or Land account, which should have a full and complete history. The history for Subscription should contain the number of shares subscribed for, and by whom. The Treasury Stock account should state the number of shares, and how created. An explanation for the Plant account should be about as follows: For the appraised value of 30 acres of land, situated in Venango county, State of Pennsylvania, donated to the Excelsior Oil Co. by Samuel Warden, with all his rights, titles, claims and privileges, as per Deed dated January 1st, 1894; said Excelsior Oil Co. incorporated with a capital stock of $200,000, consisting of 2000 shares, par value $100 each. Also copy the Deed. To save space here the history of all transactions has been omitted; but on your books make them full and clear; omit nothing of importance to save writing.

A Retail Grocery Company.

Ex. 259. A Joint Stock Company is incorporated to conduct a Retail Grocery business, with a Capital Stock of $65,000, 650 shares, par value $100. Four hundred shares of stock are taken by the incorporators, they to pay $10 per share. The remaining 250 shares are reserved for Working capital. Real Estate is bought and paid for partly in cash and partly in stock. Money is borrowed to pay Dividends. Dividends are declared and paid in stock. What entries?

The incorporators have received $40,000 worth of stock, even though they should never be required to pay more than the first installment of 10%. The Capital Stock, however, is nominally paid up to the extent of $40,000.

What entry for the installment of 10% ?

A. Adams, his 10% on 100 shares........ $1000.00

H. R. Groff, his 10% on 100 shares......

1000.00

1000.00

H. C. Wheeler, his 10% on 100 shares... 1000.00

To Installment No. 1..

$4000.00

When the subscribers pay their 10%, credit their accounts, and then issue to them their stock. Number the installments or assessments in regular order, and carry the Installment account as a liability. If the books are opened as shown in the last entry, the stockholders individually charged and Capital Stock credited, after which no more installments are required, the stockholders would be holding stock representing $40,000, while the Capital Stock would only be credited with $4000, the amount paid in. If shares are delivered when the first installment is paid, the Capital Stock is nominally paid up to the nominal par value of the certificates of stock issued.

The company buys Real Estate, and pays for same partly in cash and partly in stock. Buys from V. C. Taylor a three-story brick block on Superior Street, corner of Public Square, for $15,000, pays him $7500 in cash and issues him 75 shares full paid stock for the balance of $7500. What entry?

A net gain of $6000 has been realized, and a Dividend of $4000 has been declared. There being no cash in the treasury, money is borrowed to pay the Dividend. What entries, if they discount their note at the bank?

To Pay Dividends With Stock.

If all the original Capital Stock has been issued, and the company should issue stock to pay Dividends, it would be "Watering." But Treasury stock may be sold, and the proceeds used to pay Dividends, provided the business has made a profit, as Dividends can only be paid out of profits, as stated before.

If the Dividend be paid with stock, the entry will be:

The above would be the entry if the stock was watered. If paid out of the Treasury Stock, the entry would be:

The last two entries differ somewhat from those made in previous Dividends. The reason is this: The Treasury Stock is held for Working Capital; but if it is sold to pay Dividends, Working Capital does not receive the benefit, hence it is reduced and the Surplus is retained by the company. At some future time the company can replace the credit to Working Capital by Debiting Surplus Fund and Crediting Working Capital.

A Limited Manufacturing Company.

Ex. 260. Anderson, Holden, Burton, Blee and Fulton form a Limited Partnership Company. The opening entries are made independently of the Subscription and Installment Books. Capital Stock $100,000, 1000 shares, par value $100. Anderson takes 200 shares and pays Cash $20,000; Holden takes 200 shares= $20,000, and pays $10,000 Cash and a Warehouse which he deeds to the company for $10,000; Burton takes 200 shares $20,000, and pays $10,000 Cash and Mdse. for $10,000; Blee takes 200 shares= $20,000, and pays Cash; Fulton takes 200 shares-$20,000, pays Cash $10,000 and gives his Note for $10,000 at 30 days. What entry to open the books?

Issue them their certificates of stock, and credit them in the Stock Ledger accordingly.

Holden sells 100 shares of his stock to Baldwin for $10,000 Cash, and the remaining 100 shares to the company, one-half of which is paid in Cash, the balance with the company's Note at 6 months. What entry?

Treasury Stock............... $10000.00

The transaction between Holden and Baldwin does not enter upon the books of the company, only that Holden is debited in the Stock Ledger and Baldwin is credited. The Treasury Stock account is credited also in the Stock Ledger.

The net gain for the year is $15,000. The Board of Directors declare a Dividend of 10% and create a Reserve Fund of $5000. What entry?

To Dividend No. 4, 1894............ $10,000.00

In the above Dividend No. 4, Treasury Stock is entitled to Dividend on 100 shares, or $10,000, which at 10% $1000. This $1000 is a gain and belongs to the company. To take it out of the Dividend