The method of collecting by a time commercial draft is as follows: The Cincinnati bank to which this draft is mailed immediately notifies the Acme Buggy Co. and if the Company agrees to pay the draft, when due, the following is written across the face of it: "Accepted Acme Buggy Co." If the Company refuses to accept the draft, the Cincinnati bank will return it to the Liberty National Bank, and Jordan & Co. will be notified that the goods are at Cincinnati at their risk. When a time draft is accepted, it has the same force as a promissory note and may be discounted in the same way. In collecting by draft, the exchange is always collected on the face, not on the proceeds, of the draft. Written Work 1. If the draft of Jordan & Co. was accepted and discounted June 29, 1906, find the term of discount. 2. Find the proceeds remitted to Jordan & Co. if this draft was discounted June 29 at 7%, with 1% exchange for collecting. 3. The Jareki Mfg. Co., Sandusky, O., draw at sight on James Howard, Canonsburg, Pa., for $159.70 through the Erie National Bank, Sandusky, O. Write the draft. 4. Freeman Bros., Fargo, N.D., Jan. 2, 1907, sell on 60 days' time to the Standard Milling Co., Minneapolis, Minn., 12000 bu. No. 2 wheat at 921 per bu., delivered at Minneapolis, and draw a time draft which is accepted by the Standard Milling Co. The Merchants National Bank of Minneapolis buys this draft Feb. 1, 1907, at 7% discount. If exchange is %, find the proceeds from the sale of the wheat. 5. Charles Boyd, Fremont, O., owes Samuel Johnson, Jacksonville Ill., $600 due June 10, 1907. Mr. Johnson desires the money immediately, and draws on Mr. Boyd March 24, 1907, through the Illinois National Bank, Jacksonville, a time draft due June 10, which Mr. Boyd accepts March 30. The Fremont bank discounts the draft at 6% on the day of acceptance. If the exchange is %, how much is remitted to Mr. Johnson? 6. T. F. Bowman & Co., Chicago, sell to Speer Bros., Seattle, Wash., $4000 worth of merchandise. Terms: 60 days net; 5% off 30 days. Write the banker's check given by the Seattle National Bank and indorsed in full by T. F. Bowman & Co. Find the cost of the banker's check at 1% exchange, if paid within 30 days. 7. James Brown, Lansing, Mich., sells $2500 worth of celery on March 1, 1908, to Grimm Bros., Boston, Mass., and draws a draft for 90 days after sight. The draft is accepted March 18, and discounted the same day at 6%. If the cost of collection is % exchange, find the proceeds from the sale of the celery. STOCKS AND BONDS STOCKS When an individual or a few persons do not wish to furnish all the capital or money required for a business, or to assume all the responsibility, they may secure a charter from the state government to form a corporation or stock company, and choose a board of directors to transact the business in the name of the firm designated in their charter. A corporation is a company authorized by a charter to transact business as an individual. The capital stock of a company is the amount of stock for which shares are issued. Thus, 1000 shares at $10 each make a capitalization of $10000. The par value of the shares in different corporations varies from $1 to $100. The persons who form the corporation determine the number and par value of the shares. Observe that the certificate on p. 249 gives the number and value of the shares. The par value of a share of stock is the amount written on the face of the stock certificate. What is the par value of the stock certificate on p. 249 ? The market value of a stock is the price at which it is selling. A stock is selling at a discount when purchased for less than its par value, and at a premium when selling for more than its par value. STOCK CERTIFICATE Incorporated under the Laws of the State of Pennsylvania No. 25 20 Shares of Endependent Fron Company of Pittsburg This certifies that ...James Wood ·Twenty --- is the owner full paid shares of the Capital Stock of One Hundred Dollars each of the Independent Iron Company. Transferable only on the books of the Company by the holder in person or by an attorney upon the surrender of this certificate. Pittsburg June 1, 1906. J. G. Meyer, President. A stockholder is one who holds stock in a corporation. An assessment is a sum levied on the par value of each share of stock to defray expenses and losses when the earnings are not sufficient. A dividend is a part of the net profits divided among the stockholders, in proportion to the par value of their stock. These dividends are paid yearly, half-yearly, or quarterly, as the board of directors may determine. A stock broker is a person who buys and sells stocks for another. The charge, called brokerage, is usually % to 1% on a par value of a hundred dollars. Most brokers belong to some stock exchange. Par Value and Brokerage. 1. Mr. James buys 10 shares of railroad stock, par value $100 per share, at $89 per share, brokerage %. 1. What is the par value of each share? 2. What is the market value of each share? 3. Show that each share costs Mr. James $ 89.12. In the study of this subject the following should always be observed: 1. When the par value of a stock is not stated it is always regarded as $100. 2. When a stock is quoted at 90, 110, 78, etc., it always means so many % of the par value. A stock quoted above 100 is said to be above par, or at a premium, and one quoted below 100, below par, or at a discount. 3. Brokerage is always reckoned on the par value and the broker collects brokerage from both the buyer and the seller. 1% brokerage means $.12 on a par value of $100, or $.06 on a par value of $50. To find the cost we add the brokerage to the selling price or pur chase price and then multiply that amount by the number of shares bought or sold. Brokerage is not to be computed, unless stated in the problem. Written Work 1. Find the cost of 48 shares of railroad stock bought at 95, brokerage %. $95+$1 = $951= cost of 1 share. Find the cost of: 48 × $95 $4566, cost of 48 shares. = 2. 60 shares of stock at 101, brokerage %. |