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(As per provision of Illinois law) Unearned Premiums..

$55,850.00 Deduct: Required Reserve 50%.

27,925.00 Available portion of above..

$27.925.00 Deduct: For current deficit...

$3.598.43 For reserve for losses.

5,210.85 Accounts Payable...

3,180.75 11,990.03 Dividend which may be declared as against one balf of unearned premiums...

15.934.97 Which is .07967485% of Capital Stock Florida State Board of Accountancy.

AUDITING. (2) What do you consider the proper way to handle cash in accounts ?

What advantages are there, if any, in banking each day the exact receipts of the previous day?

How would you verify the correctness of a cash book, and ensure the entry of all cash received ?

(8) Give at least two (2) examples of contingent liabilities, and state how they should be treated in the books, and on the balance sheet.

(10) A new company sells some of its stock at a premium. State how these premiums should appear in the accounts.

(12) What duties and responsibilities has an auditor in connection with inventories of goods on hand ?

(13) A firm has been doing business for ten years during which time no audit has been made, and nothing has been charged off on account of bad debts. There are six hundred (600) accounts on the ledger. State how you would verify and classify them.

PRACTICAL ACCOUNTING. (2) A land company owns a number of city lots, the price of each of which is fixed by schedule, and offers them for sale under three distinct plans: (a) A cash payment of 25 per cent. of the price, and 75 per cent. in five

years, mortgage at 8 per cent. interest payable half-yearly. (6) A cash payment of 10 per cent of the price in exchange for which

a bond for title is given, providing that the purchaser shall make monthly payments, that unpaid balances shall be subject to interest at 8 per cent. per annum payable half-yearly, and that title

shall be given when purchase price and interest are paid. (c) To the purchase price is added an amount calculated to represent

the interest, the sum of these is then divided by 120, and bond for title is given providing for payment of the sum in 120 equal payments; on these being made deed is to be executed.

Outline the entries for each transaction, especially those relating to the interest.

(3) A, B, C, are partners: A is to receive a salary of $2,000 per annum; B, $2,500; and C, $3,000. The balance of profits after payments of salaries, is to be divided as to the first $20,000, 4 to A, and Y6 each to B and C; and profits above $20,000 are to be divided equally among the three. A retires from active business, and gives up his right to salary for 1906. The profits for that year, before charging salaries, amount to $35,000. To what extent are A, B, and C, respectively effected by A's concession?

(6) On ist, of July, 1905, a company borrowed $100,000 at 4 per cent. per annum, payable half-yearly, and payment of loan to be made at the end of ten years (10 yrs.) at 105 per cent. It was decided to set aside annually, out of the profits such a sum as would with interest at 4 per cent. per annum, provide for the payment of the premium on the loan at the end of the term.

(12) A client tells you that he is thinking of purchasing a going business which the owner tells him has earned $50,000 in two years; there is : Real Estate said to be worth.

$39,000.00 Machinery and Equipment..

20,000.00 Stock on hand. ...

. 15,000.00 Book Debts

.. 10,000.00 The business has been established for 20 years, and $90,000 is asked for the concern (including the above assets). You are desired to make an examination for your client, who will act on your representation.

(14) The following is the trial balance of a land development company which has been in business for a year:


Capital Stock...

Authorized ($300,000)
Bills Payable...
Sundry Creditors.
Mortgages Payable...
Interest & Discount
Gains on Sales....

5,000.00 10,000.00 18,000.00 18,000.00 25,000.00

Real Estate..... $108,000.00

96,000.00 Bills Receivable....

30,000.00 Stock Subscription..

12,000.00 Balance due on Real Estate sold on time.

42,000.00 Mortgage Interest received..

5,000.00 Expenses

6,000.00 Salaries..

8,000.00 Preliminary Expenses 16,000.00 Taxes paid on Mort

gaged Real Estate.. 1,200.00 Sundry Debtors..... 8,000.00 Surveying & Engineering...

4,800.00 Cash in Bank....


In your opinion is there a profit or a loss? The directors are very desirous of showing a gain. What could you recommend in order to meet their views, and yet care for the rights of the stockholders?


(5) How are dividends declared ? From what funds are they payable, and what penalties attach to improperly declaring or paying them?

(6) Describe at least two methods of estimating depreciation for a manufacturing concern; state the advantages and disadvantages of each, and show how the entries would be made in the books ?

(7) It frequently occurs that on preparing a balance sheet, it is found that certain assets are worth more than the figures which represent them on the books, c. g. Real estate has enhanced in value as proved by bona fide scales of adjacent and similar property. The market price of merchandise on hand has risen. Market quotations on bonds and stocks are higher than when such securities were bought. There are on hand completed goods which are held awaiting completion of other goods to fill orders which have been received.

State whether or not it is proper to show such items of profit or increase in the profit and loss account, or in the balance sheet, and if so, in what form they should appear?

(13) What is the best plan for dealing with percentages from an accountant's point of view? If an article cost $100, and is sold for $125 what do you consider the percentage of profit, and how does the sellers view of this often differ from the accountant's? In calculating percentages on such account as a merchandise account, where purchases are debited and sales credited, what special care is required in order to obtain correct results ?

(15) In estimating the value of a business, some accountants lay stress on the value of the balance sheet, while some seem disposed to almost ignore it and depend chiefly on the revenue account. Which of these do you consider correct? Give examples of the danger which is likely to occur from carrying each view to an extreme.


(2) Give a brief account and show the connection between :-law merchant, common law, statute law.

(8) What is usury? Give the legal rates of interest in Florida, and state the results of an agreement to pay more than the legal rate.

(13) Define partnership. How many kinds of partnership are there, and wherein do they differ from one another?

COMMENTS. There is not much to be said on the make-up of the Illinois questions except, perhaps, that they are to some extent at least, specialized problems. The solutions, as given by Mr. Ruark, while accurate as to results, lack the proper form and style to be impressive. Surely there is no necessity for such fancy journal headings as “Gross Profit," "Business Profit," and "Net Profit.” If we were to post from the closing journal entries given, it is questionable whether we would subdivide the income and expenditure account as to gross, business, and net profit, as separate accounts. True they are sectional parts and should be shown as such, but under general and not subdivided accounts.

The readers of THE JOURNAL will be interested in the representative problems and questions of the Florida State Board of Accountancy. This is the first examination since the passage of the C. P. A. law in the state of Florida, and in a measure discloses the professional standard required by the Board. Candidates were asked in each of the four papers to answer ten questions out of fifteen; the first five questions being required, the balance elective. The three papers in Theory of Accounts, Auditing, and Commercial Law, can be dismissed without much comment. They are of about the same calibre as the average paper of the State Boards in the above mentioned subjects, where the four-subject division of the examinations is adhered to. What attracts our attention is the paper in practical accounting. In the first place, we find something novel in it. It does not consist of two or three printed pages to a single question, and yet is practical in text. It is refreshing to note a slight change from the ever and ever repeated routine. A candidate's ability can be tested by a short practical problem just as well as by a three page question. On the other hand, it is too much to ask of a candidate to answer ten, however short, practical problems in three and one-half hours, especially so when among the ten questions there are some of considerable importance requiring special attention and reasoning. The board furthermore uses terms somewhat inaccurately, which in an examination is a great demerit.

However, as a whole, the State Board of Florida is to be congratulated in that it starts in the right direction. We hope that the members will eliminate the small defects of the first paper, and that their standard will come to merit general approval by the profession.

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