COST ACCOUNTING 325 



silage, 95 tons at $5.32 (cost), $505.60; seed, 15 bu. corn at $1, 

 plus cost of sorting ($1.92), a total of $16.92, being nearly 

 $1.13 a bushel; household furnishings, $400. 



INSTRUCTIONS AFTER CLOSING 



(a) Take a trial balance which will serve also as a Statement 

 of Resources and Liabilities as of Feb. 28, 1917. 



(b) Study the accounts carefully. Compare them with the 

 corresponding ones of the preceding year. Scrutinize the Loss 

 and Gain accounts of the two years together. Do the same 

 with the two trial balances after closing. 



(c) Preserve the books, accounts and records for use in the 

 problem following, which is a continuation of Mr. May's busi- 

 ness; and for the problems of Chapter X, which call for 

 further analysis of these accounts. 



5. You are to keep the books for the farming business of 

 Mr. May for the third successive year Mar. 1, 1917, to Feb. 28, 

 1918, following the same general principles used in the two 

 preceding years. 



Mar. 1, 1917. Mr. May has completed negotiations for the 

 purchase of 170 acres of the farm from W. E. Reed for 

 $21,700, being at the rate of $110 an acre with an additional 

 $3000 for the improvements. The price includes all expenses in 

 connection with the purchase. 



In meeting the purchase price he pays $3200 in cash, bor- 

 rows $10,000 on a 6% 20-year first mortgage note (interest 

 payable annually) under the Federal Farm Loan Act, through a 

 local National Farm Loan Association; and gives W. E. Reed a 

 second 6% mortgage for $8500 to run ten years with the privi- 

 lege of paying off the principal in multiples of $100 on any 

 interest paying date. (A payment of $87.18 each year for 20 years 

 under the amortization plan at 6% is required in order to pay off 

 the principal and interest when the principal is $1000. When the 

 principal is $10,000, therefore, at the same rate for the same 

 time, the annual payment is $871.80.) 



The entry for the purchase should express the following 

 debits and credits: 



