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divided into three sections representing cash, loans, and
other resources. As it is necessary to know in what form these
resources are, the complete blocks which represent the total




Pig. 3

resources of each district, are sectioned to represent the pro-
portionate amount of cash, loans, and other resources, as shown
by the key. The chart could be drawn on section paper with
amounts marked in the margin to indicate the amoimts that
the different items represent. When this is done, to find the
total amount of each kind of resource, the cash will be read
direct from the chart figures; the amotmt of loans is found by
subtracting the amount of the cash from the amount coin-
ciding with the top of the loan section; the amount of the other



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6



GRAPHS



§41



resources is found by subtracting the amount coinciding with
the top of the loan section from the amount opposite t^e top
of the block.

Another way of indicating the amounts is to print the figures
either in or opposite each section. The best method to use
is the one that will make the most striking comparison.



Other Counties, $1 10,500.000
Spain. $123,000,000
Brazil. $125,500,000
Japan. $142,200,000
Turkey. $142,400,000
Egypt. $190,000,000

Italy. $248,300,000

Argentina. $281,400,000
Austria. $294,500,000

Balance British Empire. $37^.200,000
India, $374,000,000
Europe, Not Qven Separately, $391,800,000



England, $730,900,000



Gcnnany, $863,400,000



Russia, $1,000,200,000



France. $1,200,000,000



United States $1,879,500,000



Pig. 4

7. Blocks or lines can be used in many other ways; Fig. 4
shows blocks used as steps. The size of the blocks are rela-
tively proportioned by their cubic contents; lines could be used
in the same form but using only proportionate lengths. Another
manner in which the blocks can be used to advantage is as shown
in Fig. 5, where the blocks represent the proportion that the



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§41



GRAPHS



different items of cost bear to one another and fo the total cost
and selling price of a manufactured product. The first block
represents the cost, $25, of material used in the manufacture
of an article. Stepped on this is a block that represents
the cost of the labor, $50, entering into the manu-
facture. Together these two items form the primary cost, $75.
On top of the primary cost is added the block representing
indirect expenses, $50; this, with the primary cost, makes the
final factory cost of the product, $125. To the final factory
cost is added the block representing the selling and administra-
tive expenses, $25, which with the final factory cost makes the







PKrfit.25


Sdlins
Prica,

m







SeHinffMd
ExpenMs,25


Total Coit
To
Sdl.
150






Indkeet
E>cp«fiM.50


Final Factoiy
Cort.
125




labor. 50


Prime
Coct.
75


Mtleriai.25



Pig. 5



total cost of the product to sell, $150. To this total cost to
sell is added a block for the profit, $26, which makes the final
step and gives the selling price of the product, $175.



BROKEN-UNE GRAPHS

8. Broken-line graplis, or line charts, are useful in
showing the fluctuations in any business or part of a business.
This style of graph compares the results of a business and is best
constructed on section paper. The imits of the business are
usually placed vertically at the sides of the chart and the periods
of time, arranged horizontally, are shown at the top and bottom
of the chart, as in Fig. 6. In this case, the periods of time are
the calendar months of the years 1913 and 1914; therefore,

I L T 234—20



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8



GRAPHS



§41



each vertical line represents 1 month; the units of measurement
are hundreds of dollars, so the space between each horizontal
line represents $100.

9. As a basis for constructing a chart it will be assumed
that the figures on page 9 show the railroad revenues and
expenses per mile of road for the periods shown.



1913



1914



-au. S< S-a-a<<ioO



Z Q ^ £ S < S =>




tC> g i d t H > d
-3 < 0) O ~ '



1913 Fig. 6 1914

First, the range of the figures must be considered, in order that
the scale to which the chart must be made shall be of a con-
venient size. The range of the figures for the periods of time
is January, 1913, to December, 1914, inclusive, making twenty-
four periods, each represented by a vertical line. For the



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§ 41 GRAPHS

.Q^o Operating

*^^^ Revenue

January $1,090

February 1,010

March 1,080

April.....' 1,070

May 1,150

June 1,140

July 1,160

August 1,225

September 1,250

October 1,290

November 1,160

December 1,100

1914

January 1,000

February 900

March 1,070

April 1,025

May 1,040

June 1,080


units of measurement by dollars, the lowest is $170 and the
highest $1,290. By making the space between each horizontal
line represent $100,' it is possible to start from zero and mark
up fourteen lines so as to give a margin at the top and bottom.
Starting from the bottom, the horizontal lines may, therefore,
be Tiimibered 0, 1, 2y 3y etc. and at the top of each vertical
line the month may be written, and above the* months the
year may be designated. With this done the line for operating
revenues may be plotted. The figures show that the operating
revenue for January, 1913, was $1,090; therefore, on the line
representing January, 1913, the horizontal line representing
$1,000 is found and on the January line a point marked off
nine-tenths of the distance between the $1,000 line and the
$1,100 line, as 90 is nine-tenths of the difference between $1,000
and $1 , 100. On the vertical line representing February, point off
$1,010; this will be located one-tenth of the space above line 10,



Operating


Net


Expenses


Revenue


$800


$290.


760


250


790


290


810


260


830


320


800


340


810


350


830


395


840


410


870


> 420


825


335


800


300


775


225


730


170


790


280


770


255


780


260


770


310



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10 GRAPHS § 41

For March, the point is located eight-tenths of the distance
between the lines 10 and 11. For April, seven-tenths above line
10 \ for May, five-tenths, or midway between 11 and 12, and
in like manner for all the months listed. After the points are
located straight lines connecting the adjacent points should be
drawn; this will give the graph for the operating revenues.

In the case of the operating expenses per mile, the points are
located in the same manner as were the points for the operating
revenues; connecting lines are then drawn, as before, to com-
plete the graph.

10. The net operating revenues are the difference between
the gross operating revenues and the gross operating expenses.
For any month this is equal to the distance between the points ,
designating operating revenues and operating expenses on the
line representing that particular month. The total net reve-
nues is equal to the space between the operating-revenue graph
and the operating-expenses graph. This space, to show the
net revenue clearly, can be shaded or colored, as in Fig. 7.

11. Use of Line Cliarts. — Graphs can be used for com-
parison of prices of different commodities, etc. and to show
how these prices fluctuate yeek by week and year by year.
In Fig. 8 is shown a comparison of the rates of foreign exchange
for the years 1904, 1905, and 1909. A reference to the key will
show that the heavy black lines represent the prices week by
week for 1904, the Ught full lines give the prices for 1905, and
the dotted lines the prices for 1906. These lines could be shown
by different colors as well as by different construction, or addi-
tional lines varying in construction or color may be added to
the chart to show subsequent year's prices. This chart is
divided into three parts, one dealing with the price of sterling,
one with the price of francs, and one with the price of marks,
but all parts are constructed from the weekly exdiange quota-
tions. Notice that the peaks, or high points, point to the par
value; that is, the figures in the charts for sterling and marks
are arranged in an ascending order, as these prices are at a dis-
count, while the figures for the prices of francs are arranged
in a descending order, as francs are at a premium.



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TABLE OF COMPARI

FOREIGN



ACTU/^







J/
5 1


^NUARY
15 20 2


5




FE

1


BR


UARY
5 20 25




; 1(


lAF
J I


iOH
S 20?


5




APRIL
S 10 IS 20 25


MAY
S 10 I? 20 2,


?..


JUNE
5 10 15 20 2?


490




















1 —
















































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Key 1904-

T L T 234 5 41



1905



1900-



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BON OF THE RATES OF

I EXCHANGE

KEDON

«L RATES



to. 8



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§41 GRAPHS 11

12. High and low graphs are useful in listing high and low
prices for stocks, bonds, or other commodities. To construct
this style of graph, the high quotations are charted the same
as in the previous examples and then the low prices, the space



. between the two graphs, is then shaded or colored so as to form
a wide line. The intersection of the top of this line with a line
representing any period will then show the high prices and
likewise the intersection of the bottom will show the low prices
for that period. Such a graph is shown in Fig. 9.



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sstss^j;^9§ss;9;sss;i;ii(;(S| s;s;s^s!^^s^ss«s;xs;^9.^



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^












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12



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§41



GRAPHS



13



CIRCLE GRAPHS

13. Circular graplis represent diflferent phases of busi-
ness activity and show the relation of the various items to the
business as a whole. To construct one of these graphs a circle is
drawn to any convenient scale to represent the total business.
To reduce the different items of the business into their pro-
portionate number of degrees, all the items must be added
together to get the total business; the relation that each item
bears to the .total business will be shown by a subdivision
bearing the same relation to the complete circle, or 360°. For
example, if a business con-
sists of four departments,
one of which has a net
revenue of $6,500, another
has a net revenue of $7,000,
a third has a net revenue
of $2,100, and the fourth a
net revenue of $1,400, the
total net revenue will then
be $17,000.

The complete circle, or
360°, will then represent
the total business of
$17,000. The section of it
that will represent depart-
ment 1 will bear the same relation to the complete circle, or
360°, as $6,500 bears to $17,000. By proportion, dropping the
himdreds, this section will be 65 : 170 =3^ : 360, or multiply-




Total Business
$17,000

Fig. 10



ing the extremes and dividing by the mean,



65X360
170



= 138°.



For department 2, the section will be 70 : 170 = x : 360 =



70X360



= 148°. For department 3, the section will be 21
21X360



14



170
170=:*;



170
170=r^:360

be



=44°. For department 4, the section will

This graph is shown in Fig. 10.



360=li>^-~=30°
170



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14



GRAPHS



§41



To prove, these sections shoiild be added together and their
sum should equal 360; 138°+148^+44^+3(f =36(f. These
degrees are laid off on the circtmiference with a protractor
and radial lines drawn from these points to the center; the
spaces between these lines will then represent in proper pro-
portion the different items of net revenue.




14. Approximate Metliod of Preparing Graplis. — In

case a protractor is not at hand, or if its use is not imderstood,
an easy approximate method of laying out these graphs is to
divide the circle into eighths. This can be done by first draw-
ing a line through the center, cutting the circumference on each
side ; this will divide the circle into halves. Draw a linfe through
the center, perpendicular to this first line, to divide the circle
into quarters. Bisect two of the arcs, not diametrically opposite,



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§41 GRAPHS 15

and draw lines from these points through the center cutting
the circumference ; this will divide the circle into eighths. When
this is done proceed by the use of proportion, as when using the
degrees, but instead of using 360 for the last extreme use 8.
For example, using the same figures as: For department 1,

65 : 170=^ : 8=^^^=3 of the \ ^aces. For 2, 70 : 170
170

=^:8='^^=3| of the \ spaces. For S, 21 : 170=ii; : 8

=2lX8^j of the \ spaces. For 4. 14 : 170=ii; : 8=^^^^
170 ^ 170

= f of a| section.
To prove, 3+3i+l+|=8 sections.

15. Use of Percentage. — ^Another plan is to divide the
circle into one hundred parts, as in Fig. 11. The relation of
each part of the business will then be found by dividing each
item by the total business, thus reducing each item to its proper
percentage; this will give the number of hundredths to lay off
on the circumference. Lines are then drawn from these points
to the center as shown.

16. Comparison by Circle Graplis. — If it is desired to
show the net revenue with its factors for two or more periods,
a circle of convenient size is taken for the base and other circles
are made larger or smaller than this base circle in the same pro-
portions as the net revenues for. the different periods bear to
one another.



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C. p. A. QUESTIONS AND ANSWERS

(PART 1)



PRELIMINARY REMARKS

1. A number of questions taken from the C. P. A. examina-
tions given in different states, have been fully worked out in
preceding Sections. But as there is no better preparation for
these examinations than a study of such questions and their
answers these Sections are devoted entirely to this work.
To get the greatest benefit, however, each question should be
carefully studied and^ worked out before the published answer
is studied. It is not necessary to use the exact forms of stating
the answers shown here, but care should be taken that only
the principles of correct accoimting are used.

2. One of the benefits to be derived from a close study of
such questions and answers as are given here is the training in
analyzing the questions. Another benefit is the drill in assimi-
ing bases, or starting points, which must often be done in order
that the questions may be answered at all, at least if the
answers are to meet the ideas the examiner intended to be
brought out.

All the questions given in these Sections, including those
given in the Examination Questions, have been taken from
C. P. A. exanjination papers of various states. They may,
therefore, be considered typical questions and show the general
methods adopted by the examining boards. The student who
has familiarized himself with the principles and methods
covered by the lessons up to this point will find no difficuly in
working out these typical problems.

COPYRIGHTKD BY INTKRNATIONAL TKXTBOOK COMPANY. ALL. RIGHTS RBSKRVBD

§42



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C. p. A. QUESTIONS AND ANSWERS



§42



Sales


$12,110


Plant and tools


1,550


Stores


1,630


Cash


. 1,513


Office furniture


200


Accounts receivable


2,750


Accounts payable


1,670


Capital accounts March 1,




1913, A


2,000


Capital accounts, B


1,500


Capital accounts, C


1,200



QUESTIONS AND ANSWERS

3. Question 1. — ^A, B, and C go into business as con-
tractors on March 1, 1913, with assets as follows: Cash $1,520,
plant and tools $1,550, stores $1,630. The investment of each
is A, $2,000; B, $1,500; C, $1,200. The profits are to be divided
equally, (a) From the following details construct a trial bal-
ance as at February 28, 1914:

Expenses $ 550

Wages 1,250

Salaries • ' 175

Rent 145

Purchases 8,350

Commissions paid on sales 78

Bad debts 35

Discounts on purchases 20

Loan from C 1,000

Drawings, A 570

Drawings, B 400

Drawings, C 304 ^

(6) Prepare a statement of income and expenditure, (c) Pre-
pare a statement of receipts and disbursements, (d) Prepare a
profit-and-loss account, (e) Prepare a balance sheet, (f) Pre-
pare, in ledger form, the capital accounts of the partners.

Memoranda. — ^Accounts payable includes $250 wages and
$100 expenses. Depreciate office furniture 10 per cent. Inter-
est at 5 per cent, on capital and loan accoimts for 1 year.'
Inventory, stores, February 28, 1914, $1,903; plant and tools,
February 28, 1914, $1,550; accrued wages, February 28, 1914,
$33; accrued expense, February 28, 1914, $50.

4» Answer to Question 1. — ^This is one of four questions
that were required to be completed by candidates in 3^ hours.
The question, though not difficult, requires a thprough grasp of
accoimts and the classification of details for satisfactory answer.
The statement of receipts and disbursements has reference to
the receipts and payments of cash. The statement of income
and expenditures is practically identical with the profit-and-loss
statement as it comprises the sales, purchases, expenses, etc.



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§ 42 C. P. A. QUESTIONS AND ANSWERS 3

The profit-and-loss account may contain the same information as
the statement of income and expenditures. Assuming that the
examining board may have required a specific division between
these two statements, only such items are placed in the profit-
and-loss accotmt as pertain to the division of profits. A study
of the exhibits will make the meaning clear and show the divi-
sions referred to.

It will be noted that this is a partnership firm in the business
of contracting, and that the information given pertains entirely
to the first year's operation. The sales accotmt represents the
aggregate business done, while the purchases have reference to
the material, stores, etc., purchased. As there are no contracts
in operation, adjustments of process costs or partly earned
profits are not necessary. The stores $1,630 are material and
supplies on hand at the beginning; and this, together with the
purchases $8,350, less the inventory of stores on hand at the
closing $1,903, gives $8,077 as the amount used in the com-
pletion of contracts.

The loan from C may be treated the same as a loan from the
bank, but since interest is accrued on it such interest should be
credited to C*s personal accotmt, or else to interest accrued
accotmt. This interest is shown in the division of profits, but
there is no objection to including it in the expendittires.

5. The capital accotmts and personal accotmts of the part-
ners may be kept separate. At the time of closing, the capital
accotmts may remain intact, while personal drawings accotmts
may be used to show the profits and drawings. All items are
adjtisted into the capital accotmts, in the accompanying
analysis, in order to exhibit all the details necessary and to
simplify the balance sheet. The acQotmts payable, $1,670,
include wages and expenses, which amotmts are separated
therefrom in the balance sheet in order to present conditions in a
true light. There is a difference between wages due and wages
accrued, therefore they are separated in the statements. Inter-
est on capital is not an expense of the business but a part of
the profits, and it is so regarded in the profit-and-loss accotmt.
This interest is deducted from the net earnings, however, before



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4



C. P. A. QUESTIONS AND ANSWERS §42



the final division of remaining profits is made. The profit-and-
loss account shows the distribution of profits to partners at the
date of closing. The six exhibits called for are as follows:



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