Manufacturing operations during the year:

$79,820.34

Labor applied and distributed to M'f'g. Cost... 120,250.40

Raw Material issued on requisitions...

-31.46187% percentage to be added to prime cost to make cost of production.

200,070.74

Finished Goods during the year at prime cost:

.$78,542.58

Labor....

118,333.75 $196,876.33

Raw Material...

196,876.33

-98.40336% percentage of year's prime cost used in finished goods during year.

200,070.74 Therefore,

=

$24,846.00 x 98.40336% 24,449.30= Factory Expense, and $38,100.00 X 98.40336% = 37,491.68 = Management Expense.

Proof: $196,876.33 x 31.46187%=61,940.98,

and 24,449.30+37.491.68 also =61,940.98.

Hence, 31.46187% is to be added to each dollar of Labor and Material.

SOLUTION II.

Assuming that the manufacturing account is intended to be exactly balanced by the credits of product finished and final inventory, the accounts would be stated as below. The relation between prime cost and expenses cannot be proved for either product finished or final inventory. The product was presumably partly made in the previous year when other percentages for indirect expenses may have been used. The prime cost of the final inventory is not ascertainable separately for materials and labor, and the proportion of each affects the indirect expenses chargeable on the basis given. The figures used for factory expense and management expense in the product finished are therefore merely those which are found to be uninventoried, and therefore presumably previously dealt with in crediting product finished.

If in the final paragraph, "calculate the percentages to be added" means on the basis of the figures in the two preceding paragraphs, the percentages are 20.8 to materials and 38.609 (approx.) to labor.

QUESTION I (October, 1907).

An issue of $250,000 fifty year bonds, dated July 1, 1904, is redeemable by a Sinking Fund into which annual cash installments are to be paid by deposit of funds in a Trust Company which allows interest at the rate of 2% per annum, credited January 1 and July 1. Separate books are to be kept solely for recording the sinking fund operations. The fund so created is to be invested in interest-bearing securities, and the income therefrom is to be applied to the reduction of the succeeding annual installments.

On July 1, 1905,,the first installment of $5,000 was paid into the fund, and on the same day the following investments therefor were made:

Two 5% bonds of $1,000 each, April 1 and October 1, at par and accrued interest.

Two 6% bonds of $1,000 each, May 1 and November 1, at $110 and accrued interest.

On July 1, 1906, the second installment was duly deposited to the credit of the fund, and on the same day the 5% bonds purchased in the previous year were sold at 101 and accrued interest, and other investments were purchased as follows:

Two 6% bonds of the same issue as those purchased in the previous year at 105 and accrued interest.

Five 4% bonds of $1,000 each, February 1 and August 1, at 98 and accrued interest.

The income from all investments was regularly received and deposited, and the value of the 6% bonds purchased in 1905 was written down to conform to the value of the bonds of the same issue purchased in 1906 at the time of said latter purchase.

Frame journal entries and write up the Sinking Fund ledger accounts showing the amount of the cash installments, payable on July 1, 1906, and July 1, 1907, and the status of the Sinking Fund at said dates.