Knowledge that Transforms

Abstract Obsolescence is an investment in future and better operations. This article is concerned with obsolescence which occurs only from time to time in any ordinary business. It may be, that the more extensive and often cataclysmic obsolescence, which often presents itself in special industries such as public utilities, may deserve different treatment, under those conditions it may be impossible to make future operations the basis for its absorption. Additional capital may have to be called upon to take care of the situation, that fact however, in itself, would indicate as investment in obsolescence, or in progress. The new capital stands in place of the new equipment and the obsolescence created thereby. In connection with this proposition of obsolescence, as well as with other things, the writer has often wondered whether accepted accounting practices are not being influenced by certain opportunistic factors, of which Federal Income Tax legislation is doubtless one. Unfortunately, many sound principles are often discarded, or denied, when dollars are involved.

Abstract The attendant of income tax legislation is the presentation of statistics of profits and losses; and to the U.S. Congress, framing the Revenue Act of 1916, it became apparent that accurate information regarding the distribution of income in the U.S. has been a necessity. Accordingly, a provision requiring the preparation of statistics with respect to the operation of the income tax law has been incorporated in the act, considering statistics covering classification of taxpayers and of income, amounts allowed as deductions and exemptions, and other facts deemed pertinent and valuable. Accordingly, statistical reports have inaugurated an epoch in income statistics in the U.S. These data hold different significance for different classes of people. To the accountant most interesting tables are those showing for both individuals and corporations, receipts and disbursements by sources of income and nature of deduction. Similarly, to the sales manager, the most important data comprise tables showing the distribution of individual returns by size of net income for each state.

Reviews the book "Corporation Procedure," 4th ed. by Thomas Conyngton, R.J. Bennett and Hugh R. Conyngton.

Abstract The article presents various developments in several universities related to the field of accounting in the U.S. Professor Henry Braywn Gardner, professor of political economics in the Brown University, will retire in June 1928, after 40 years as head of the department of economics, and professor James P. Adams has been appointed chairman of the department, effective with the academic year 1928-1929. According to another information Ralph Eastman Badger, formerly associate professor of economics returns as professor of economics after two years as investment counselor for the estate of Frank A. Sayles. The University of Chicago professor J.O. Mckinsey's professional work as organization councilor and accountant has forced him to reduce his university work to the giving of two courses, business organization and business policies. Professor W.S. Krebs of Washington University will offer a course in accounting theory in the first term of the summer quarter. Professor H.C. Daines is serving as chairman of an advisory commission, which is revising the accounting curriculum of the Chicago Central College of Commerce, an institution serving employed men.

Reviews the book "Principles of Valuation," by J.A. Grimes and W.H. Craigue.

Abstract This article focuses on an accounting paradox. If one purchases at par $2,000,000 bonds bearing 5 per cent interest he will receive $50,000 each half year as interest, and at the maturity of the bonds will be repaid his investment of $2,000,000. In this case the amount collected each six months, by cashing the coupons, is the exact amount of interest earned for that period. No adjustment need be made and the amount of cash received each half year may, with propriety and accuracy, be credited to Interest Revenue. But, if the investor buys $1,000,000 5 per cent bonds at 110 and another block of 1,000,000 5 per cent bonds at 90, the ease is different. To be sure, on the face the situation seems identical with that where $2,000,000 bonds are bought at par. In each case there is an initial outlay of $2,000,000, the same sum is collected each time coupons are cashed the repayment of principal is made at the same date in each case and in exactly the same amount. Investment, collections of coupons, and payment of the face of the bonds are identical in time and amount.

Abstract Every Federal income and profits tax act discriminates between various classes of taxpayers. The sixteenth amendment of the U.S. Constitution enacted in 1913 imposed a tax of one per cent upon the net income of corporations. Thus, at the very outset, taxpayers were faced with a discrimination, and in all probability many of them took occasion to adjust their financial organizations to meet the discrimination. The U.S. Congress must have foreseen this, for the Act contained a provision imposing an additional tax upon the individual's pro rata share of corporate income which was accumulated beyond reasonable needs of the business for the purpose of preventing the additional tax upon its stockholders. Accordingly, the penalty of Section 220 under this law is imposed upon any corporation which is formed or availed of for the purpose of preventing imposition of surtaxes upon its stockholders. The penalty is fifty per cent of its net income plus dividends, which is a very severe penalty. The article discusses the impact of this penalty for corporations and stockholders in detail.

Reviews the book "Problems in Industrial Management," by Erwin Haskell and Harold Hazen Thurlby.

Reviews the book "Farm Accounting Principles and Problems," by Karl F. McMurry and Preston E. McNall.

Reviews the book "Ratio Analysis of Financial Statements," by Alexander Wall and R.W. Duning.