The first semester final exam (a.k.a. mid-year examination) for William M. Cole’s two semester Principles of Accounting has been filed in a loose-leaf collection of mid-year exams for 1911-12. This makes the post complete (for now). I am always on the lookout for homework exercises, lecture notes etc.
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Principles of Accounting
pre-1911/12
Links to earlier course material for Principles of Accounting from Harvard, 1900-01 through 1910-11.
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Accounts. Their Construction and Interpretation for Business Men and Students of Affairs. Boston: Houghton Mifflin Company, 1908.
“The first issue of this book was brought out at a time when no general, non-technical, non-professional treatise on accounting had been published . The author had then been giving for eight years a course of instruction to seniors in Harvard College on the principles of accounting, and believed that many business men and students of affairs would be interested to see briefly but comprehensively how accounts are constructed and interpreted.”
Revised and enlarged edition, 1915.
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Meet the Course Teaching Assistants
Robert Mann Johnson
Robert Mann Johnson of 58 Lynwood Road, Scarsdale, N.Y., a lawyer with the firm of Milbank, Tweed, Hope & Hadley, died of a heart attack yesterday as he enetered his firm’s office building at 15 Broad Street. His age was 60.
Born in North Weymouth, Mass., he was graduated from Boston Latin School in 1905, Harvard College in 1908 and Harvard Law School in 1911. Mr. Johnson practiced in Massachusetts before coming to New York and being admitted to the New York bar in 1921. He was with the firm of Masten & Nichols from 1928 until 1931 when he became associated with the Milbank company.
Surviving are two daughters, Marjorie Elizabeth and Hollis Ann.
Source: The New York Times, July 30, 1948, p. 18.
Clarence Birch Stoner
1873. Born on October 7 near Sulphur Grove, Montgomery county, Ohio
1896. A.B. from Otterbein University (Westerville, Ohio).
Taught school on the Old Troy pike (near Dayton, Ohio).
1898-1900. Superintendent of Schools at Schanck, Ohio.
1900-04. Superintendent of Schools at Ashley, Ohio.
1904-09. Superintendent of Schools at Mt. Gilead, Ohio.
1909-10. Auditor of the Women’s Educational & Industrial Union.
Work as statistician in Harvard’s bureau of business research [year(s) uncertain, within 1909-1912]
1910-11. University Scholarship, Harvard Business School.
1911. M.B.A. from Harvard University. Thesis “Y.M.C.A. Accounts”.
1911-12. Teaching Assistant for Professor Cole.
1912-1915. Assistant Professor at Carnegie Institute of Technology. Developed new course in commercial engineering.
1915. Starting August, appointed general auditor for Hotels Statler Co., Inc. (Buffalo, N.Y.).
Move to New York City, located in the Hotel Pennsylvania, serving as treasurer.
1928. Appointed secretary and treasurer of the Statler Hotels.
Executive of the Hotels Statler Co., Inc. at time of his death from heart disease in Short Hills, NJ on April 9, 1937.
Sources: Pittsburgh Post-Gazette, 24 September 1912; Buffalo Courier, 14 August 1915; Obituary published in The Dayton Daily News, 10 April 1937 and The Item of Millburn and Short Hills, 16 April 1937.
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Course Description
1911-12
[Economics] 18. Principles of Accounting. Mon., Wed., and (at the pleasure of the instructor) Fri., at 11. Asst. Professor Cole and assistants.
This course is designed to show the processes by which the earnings and values of business properties are computed. It is not intended primarily to afford practice in book-keeping; but since intelligent construction and interpretation of accounts is impossible without a knowledge of certain main types of book-keeping, practice sufficient to give the student familiarity with elementary technique will form an important part of the work of the course. The chief work, however, will be a study of the principles that underlie the determination of profit, cost, and valuation. These will be considered as they appear in several types of business enterprise. Published accounts of corporations will be examined, and practice in interpretation will be afforded. The instruction will be chiefly by assigned readings, discussions, and written work.
Course 18 is not open to students before their last year of undergraduate work. For men completing their work at the end of the first half-year, it will be counted as a half-course. It is regularly open only to Seniors and to Graduates who have passed in Economics 1. Students intending to enter the Graduate School of Business Administration are expected to take this course in preparation for the advanced courses in accounting.
Source: Division of History, Government, and Economics: 1911-12 (1st ed.). Official Register of Harvard University, Vol. VIII, No. 23 (June 15, 1911), p. 67.
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Course Enrollment
1911-12
Economics 18. Asst. Professor Cole, assisted by Messrs. [Clarence Birch] Stoner and [R. M.] Johnson. — Principles of Accounting.
Total 261: 60 Graduates, 129 Seniors, 68 Juniors, 4 Others.
Source: Harvard University. Report of the President of Harvard College, 1911-1912, p. 64.
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ECONOMICS 18
Mid-year Examination
1911-12
As far as possible, arrange your answers in tabular form. Follow the order of the questions.
- Assume all the books and records of a business to be correct and complete. If you desired full information about the condition of the business and could have access to one book only, what book should you choose? Why?
Show how the record of the following transaction would appear in that book: the business has for some time owed $4500 to David Copperfield, and the credit to him is already on the books, but as it cannot conveniently pay on demand it gives him a note for $4700, payable March 1, in satisfaction of both principal and interest on the debt.
- Supposing a controlling account to be required for creditors, show the cash-book page, in the form that you would recommend, to record cash payments for the following: —
| Creditor A, $7000 on account. |
Freight, $42. |
| Stationery, $45. |
Lighting, $15. |
| Express, $2. |
Wages, $100. |
| Freight, $28. |
Creditor C, $1,500. |
| Wages, $125. |
Creditor D, $2,200. |
| Creditor B, $3,000 on account. |
Freight, $23. |
| Wages, $75. |
Creditor E, $3,000. |
| Your own note, $2,000. |
|
- What expense and income accounts should you recommend (if possible, give titles that suggest the items to be carried to each account, or indicate the items in brackets) for a business operating as follows: —
Owning its own store building.
Doing its own heating, lighting, elevator service, from its own power plant.
Buying all its goods in its own town.
Doing its own hauling and delivering.
Paying the clerks regular salaries and bonuses for large sales.
Advertising by electric displays, window displays, newspapers, and circulars.
Conducting rest and recreation rooms for employees.
Allowing interest on undrawn salaries.
Investing its surplus in loans to local enterprises.
Selling goods for cash, for credit, and on the installment plan (in the latter case charging higher prices and sending out collectors).
- Below is a trial balance taken before the books were closed, an income sheet, and a balance sheet. Show (a) the ledger as it looked before closing [totals or balances only], (b) the closing items, and (c) the ledger as it looked after closing. [One ledger form will do for all unless you are unable to do (b).]
| Proprietor |
|
$140,000 |
| Bills Payable |
$20,000 |
30,000 |
| Accounts Payable |
310,000 |
328,000 |
| Merchandise |
450,000 |
350,000 |
| Accounts Receivable |
375,000 |
353,000 |
| Fixtures |
4,000 |
|
| Cash |
6,700 |
|
| Wages |
20,000 |
|
| Insurance |
400 |
|
| Taxes |
2,000 |
|
| Rent |
5,000 |
|
| Interest |
800 |
100 |
| General Expense |
7,200 |
|
|
$1,201,100 |
$1,201,100 |
| Mdse. sales |
|
350,000 |
| Mdse. inventory, 1911 |
$150,000 |
|
| Mdse. purchases |
300,000 |
|
| Mdse. handled |
450,000 |
|
| Mdse. inventory, 1912 |
140,000 |
|
| Mdse. cost of sales |
|
310,000 |
| Gross profit |
|
$40,000 |
| Wages |
$20,000 |
|
| Insurance |
200 |
|
| Taxes |
2,000 |
|
| Rent |
5,000 |
|
| Interest |
600 |
|
| General Expense |
7,200 |
35,000 |
| Net income |
|
$5,000 |
| Merchandise |
$140,000 |
Proprietor |
$145,000 |
| Accounts Rec. |
22,000 |
Bills Payable |
10,000 |
| Fixtures |
4,000 |
Accounts Pay. |
18,000 |
| Cash |
6,700 |
|
|
| Prepaid insurance |
200 |
|
|
| Prepaid interest |
100 |
|
|
|
$173,000 |
|
$173,000 |
- For the business whose statements were given in Question 4, the income sheet showed for the subsequent year a net income of $10,000 (the increase resulted from reducing expenses), and the balance sheet was as follows: —
| Merchandise |
$152,000 |
Proprietor |
$155,000 |
| Accounts Rec. |
21,000 |
Bills Payable |
15,000 |
| Fixtures |
4,000 |
Accounts Pay. |
13,000 |
| Cash |
5,700 |
|
|
| Prepaid insurance |
200 |
|
|
| Prepaid interest |
100 |
|
|
|
$183,000 |
|
$183,000 |
Where did the increase in Merchandise come from?
- Suppose the business shown in Question 4 had been converted into a corporation immediately after the balance sheet was made out, and stock had been issued for the proprietor’s credit balance. Suppose the good will had been estimated and entered on the books at $15,000, but no stock had been issued for it. If the business done in the next year had been identical with that indicated in Question 5, and no dividends had been declared, what would have been the items of the new balance sheet?
- We have three pieces of property, each valued at $10,000, subject to the same rate of natural depreciation, but we use a distinct method of treating depreciation for each. Our entries to express these methods might be expressed briefly as follows: —
| Property A. — Maintenance |
$1,000 |
|
| To Cash |
|
$1,000 |
| Property B. — Replacement Fund |
$1,000 |
|
| Depreciation |
$1,000 |
|
| To Cash |
|
$1,000 |
| Property B |
|
$1,000 |
| Property C. — Depreciation |
$1,000 |
|
| To Property C |
|
$1,000 |
What is our policy of treatment for each property?
How does each policy affect the income sheet?
How do the second and third policies differ from the first in their effect on the balance sheet?
- In June, 1912, we take a lease of a building for $10,000 a year for 10 years, to begin on Jan. 1, 1913, and therefore expiring Jan. 1, 1923. We buy of the present occupant of the premises his last half-year’s occupancy-right under a lease expiring Jan. 1, 1913, so that we may take possession on July 1, 1912. We pay him $1,000 outright for the privilege, under agreement that we shall pay the rent for the half year. To what account shall we charge the $1,000?
Is it a capital or a revenue charge? Why?
Suppose his lease had been for a term three years longer, at $8,000 a year, and therefore our lease could not become effective until January 1, 1916, and that we should have been willing to pay for the building the equivalent of $10,000 a year (for 13½ years, i. e., until January 1, 1926), for immediate occupancy. How much more than before should we have been willing to pay for his lease, supposing money to be worth 5%
Should we charge the amount to revenue or to capital?
How should we treat it a year later?
Source: Harvard University Archives. Harvard University. Mid-year Examinations, 1852-1943. Box 8, Folder “Mid-year Examinations, 1911-12″.
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ECONOMICS 18
Year-end Final Examination
1911-12
One question may be omitted.
- State clearly the relation of the journal, the sales book, the cash book, the sales ledger, and the general ledger; and illustrate your statement by telling what would be shown on each book for the following series of transactions. (Neither the illustration without the statement nor the statement without the illustration will be deemed a satisfactory answer.)
You sell John Doe, one of your many customers, goods for $1600; Doe gives you a draft on Richard Roe, which Roe accepts, for $1000; Doe later pays you $600 in cash, and Roe’s acceptance is paid in full.
- What is the effect on the balance sheet and on the income sheet of the following circumstances regarding depreciation?
- The property has been maintained at a cost of $5000.
- It has been in part maintained at a cost of $3000, a fund has been set aside for replacement of the parts not maintained amounting to $2000, and in a second year the fund has been used for replacement. (Show the two years separately.)
- Replacement has done more than maintain the property, by $2000.
- The property has been maintained out of a replacement fund, created from product, but owing to a fall in prices the fund is more than adequate for replacement and a balance of $2000 remains.
- The balance sheet of a business on Jan. 1, 1911 was as follows:
| Fixtures |
$4,000 |
Proprietor |
$60,000 |
| Accounts receivable |
60,000 |
Bills payable |
20,000 |
| Merchandise |
43,000 |
Accounts payable |
30,000 |
| Cash |
3,000 |
|
|
|
$110,000 |
|
$110,000 |
The trial balance, taken before the books were closed, on Dec. 31, 1911, was as follows: —
| Proprietor |
|
|
$60,000 |
| Fixtures |
$4,000 |
|
|
| Bills payable |
|
|
22,000 |
| Accounts receivable |
82,000 |
|
|
| Accounts payable |
|
|
27,000 |
| Merchandise inventory, Jan. 1 |
43,000 |
|
|
| Cash |
3,000 |
|
|
| Purchases |
263,000 |
|
|
| Sales |
|
|
318,850 |
| Wages and salaries |
18,000 |
|
|
| Office expenses |
5,000 |
|
|
| Advertising |
800 |
|
|
| Rent, etc. |
9,000 |
|
|
| Losses, bad debts |
1,000 |
|
|
| Insurance |
400 |
|
|
| Taxes |
750 |
|
|
| Discounts taken |
|
|
8,100 |
| Discounts given |
6,000 |
|
|
|
$435,950 |
|
$435,950 |
The balance sheet on Jan. 1, 1912 was as follows: —
| Fixtures |
$3,000 |
Proprietor |
$62,000 |
| Accounts receivable |
82,000 |
Bills payable |
22,000 |
| Merchandise |
24,000 |
Accounts payable |
27,000 |
| Cash |
3,000 |
Allow. for bad debts |
1,000 |
|
$112,000 |
|
$112,000 |
Show the complete income sheet for the year 1911.
- Tell what transactions not disclosed by the income sheet of 1911 were carried on in that year by the business for which figures were given in Question 3.
Was the condition of the business on Jan. 1, 1912, better or worse than it was a year earlier? Explain the grounds of your judgment.
- The following is an incomplete balance sheet of a national bank. All figures shown are correct. Tell what are the most probable omitted items, naming a reasonable figure (consistent with the rest of the sheet), and tell on what assumptions you determined the omissions.
Then show the complete balance sheet as it would be if your assumptions were correct.
| Loans and discounts |
$1,200,000 |
Capital Stock |
$200,000 |
| National bank notes on hand |
7,000 |
Due to other banks |
260,000 |
| Legal tender currency |
98,000 |
Individual deposits |
1,300,000 |
| Coin |
95,000 |
Bank note circulation |
20,000 |
|
|
Certified checks |
8,000 |
|
|
Certificates of deposit |
5,000 |
|
|
Cashier’s checks |
3,000 |
|
$1,848,000 |
|
$1,848,000 |
- Suppose that you are the publisher of a book for which there has been for years a steady demand, that the demand is not likely to decline, and that your copyright has five years to run. Suppose the estimated profit over the cost of manufacture of this book is approximately $500 a year while the copyright endures, and that your “courtesy-right” in the book will probably be worth $200 a year for five years more. How should you find the value of the copyright?
Should your right in the book appear on your books of account, and should it affect your annual statements? If so, how and where?
- You deem two corporations to be entitled to equally good credit. Both have outstanding 5% bonds, with interest payable semi-annually. The bonds of corporation A run twelve years, and those of corporation B run ten years. Standard bond tables give the value of twelve-year 5% bonds, on a 4½% basis — which you deem fair — as $1045.97, and of ten-year bonds as $1039.91. On March 1, you have offered to you a bond of the issue of corporation A for $1057.50, or one of the issue of corporation B for $1051.25. Which is the better offer? Show the figuring to support your answer.
- What is the significance of the items starred on the following life-insurance balance sheet?
| Bonds |
|
*Reserve |
$51,000,000 |
| Stocks |
$30,000,000 |
*Present worth of future |
|
| Real Estate |
3,000,000 |
instalments on matured |
|
| Loans on Mortgages |
2,000,000 |
policies |
250,000 |
| *Loans on Policies |
12,000,000 |
Accrued liabilities |
2,500,000 |
| *Premium Notes |
7,000,000 |
*Reserve for equalization |
|
| Cash |
1,000,000 |
of mortality |
250,000 |
| Accrued assets |
1,000,000 |
Surplus |
4,000,000 |
|
2,000,000 |
|
|
|
$58,000,000 |
|
$58,000,000 |
What is the difference between the two reserves? Between them and the surplus? Are the two starred assets presumably good or are they more or less doubtful than the other assets?
Source: Harvard University Archives. Harvard University — Examination papers, 1873-1915. Box 6. Bound volume, Examination Papers, 1912. Harvard University Examinations. Papers Set For Examinations in History, History of Science, Government, Economics […], pp. 60-63.
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Earlier Accounting Exams at Harvard
1900-01
1901-02
1902-03
1903-04
1904-05
1905-06
1906-07
1907-08
1908-09
1909-10
1910-11
Image Source: Woodcut of Luca Pacioli, “Father of accounting and bookkeeping” from his Summa de arithmetic, geometria. Proportioni et proportionalita (Venice, 1494). For more about Luca Pacioli.
