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 Chapter 06

Analyzing Operating Activities

Multiple Choice Questions

1. Which of the following is not a reason for economic income and accounting income to differ?

A. Transaction basis

B. The monetary assumption

C. Conservatism

D. Earnings management

2. As a general rule, revenue is normally recognized when it is:

A. measurable and earned.

B. measurable and received.

C. realizable and earned.

D. realizable and measurable.

6-1
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3. Which of the following measures of accounting income is typically reported in an income
statement?

A. Net income

B. Comprehensive income

C. Continuing income

D. All of the above

4. According to FASB, initial franchise fees should be recognized as income when:

A. the franchiser has substantially performed or satisfied all material services and conditions.

B. the franchiser has collected the majority of fee in cash.

C. the franchisee shows the ability to pay the fee.

D. the franchiser bills the franchisee.

Brierton Company enters a contract at the beginning of year 1 to build a new federal
courthouse for a price of $16 million. Brierton estimates that total cost of the project will be
$12 million and will take four years to complete.

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5. If Brierton used percentage-of-completion method to account for this project, what would
they have reported as profit in year 2?

A. $0

B. $1.33 million

C. $1.50 million

D. $0.67 million

6. If Brierton used cash accounting to account for this project, what would they have reported as
profit (loss) in year 2?

A. $0

B. $1.33 million

C. $(2 million)

D. $(4 million)

7. Which of the following combinations of accounting practices will lead to the highest reported
earnings in an inflationary environment?

A. Option A

B. Option B

C. Option C

D. Option D

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8. Which of the following is correct?

I. If a company uses straight-line depreciation for financial reporting purposes, it is very likely
they have a deferred tax liability with respect to its depreciable assets.
II. Straight-line depreciation yields an increasing rate of return on book value over the life of
an asset.
III. Straight-line depreciation results in lower tax payments than accelerated depreciation
methods over the life of an asset.
IV. If a company revises its estimate of the useful life of an asset upwards this will decrease
annual depreciation expense.

A. I, II, III, and IV

B. I, II, and IV

C. I, II, and III

D. I and IV

9. Which of the following statements concerning deferred taxes is correct?

A. Deferred taxes will not be found in the asset section of a balance sheet.

B. Deferred taxes arise from permanent differences in GAAP and tax accounting.

C. Deferred taxes will only decrease when a cash payment is made.

D. Deferred taxes arising from the depreciation of a specific asset will ultimately reduce to
zero as the item is depreciated.

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10. Differences in taxable income and pretax accounting income that will not be offset by
corresponding differences or "turn around" in future periods are called:

A. timing differences.

B. circular differences.

C. permanent differences.

D. reverse differences.

The following information was extracted from Smurm Corporation's 2006 annual report:

11. Basic earnings per share for 2006 was:

A. $3.50.

B. $3.16.

C. $3.08.

D. $3.00.

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12. Using the treasury stock method, calculate the number of extra shares being recognized in the
diluted EPS calculation resulting from options.

A. 500,000

B. 358,975

C. 333,333

D. 285,714

13. Diluted earnings per share for 2006 was:

A. $3.52.

B. $3.07.

C. $2.00.

D. $2.03.

Tecktroniks Company reported in its annual report software refinement expenses of $12
million, $15 million, and $18 million for fiscal years 2005, 2006, and 2007, respectively. At the
end of fiscal 2007, it had total assets of $140 million. Net income was $20 million for fiscal
2007, and it had a marginal tax rate of 35%.

14. If software refinement had been capitalized each year and amortized over a three-year period
beginning in the year the cost was incurred, total assets at the end of fiscal 2007 would have
been:

A. $185 million.

B. $172 million.

C. $158 million.

D. $157 million.

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15. If software refinement had been capitalized each year and amortized over a three-year period
beginning in the year the cost was incurred, net income for fiscal 2007 would have been:

A. $31.7 million.

B. $29.75 million.

C. $21.95 million.

D. $14.95 million.

16. If the software refinement had been capitalized and amortized over a three-year period
beginning in the year the cost was incurred, but was expensed for tax purposes, the deferred
tax position at the end of fiscal 2005 would have been:

A. a deferred tax credit of $2.8 million.

B. a deferred tax credit of $3.5 million.

C. a deferred tax credit of $5.2 million.

D. a deferred tax debit of $4 million.

17. Assume a company that normally expenses advertising costs was to capitalize and amortize
these costs over 3 years instead. After the third year net income would:

A. be higher, irrespective of the change in advertising costs.

B. be lower, irrespective of the change in advertising costs.

C. be higher only if advertising costs were increasing.

D. be lower only if advertising costs were increasing.

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18. Compared with companies that expense costs, firms that capitalize costs can be expected to
report:

A. higher asset levels and lower equity levels.

B. higher asset levels and higher equity levels.

C. lower asset levels and higher equity levels.

D. lower asset levels and lower equity levels.

19. Two growing firms are identical except that one firm capitalizes, whereas the other firm
expenses costs for long-lived resources over time. For these two firms, which of the following
statements is generally true?

I. The expensing firm will show a more volatile pattern of reported income than capitalizing
firm.
II. The expensing firm will show a less volatile pattern of return on assets than the capitalizing
firm.
III. The expensing firm will show lower cash flows from operations than the capitalizing firm.

A. I only

B. II only

C. I and III only

D. II and III only

20. The capitalization of interest cost during construction:

A. increases future net income.

B. decreases future depreciation expense.

C. increases net income during construction phase.

D. decreases assets during construction phase.

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21. Windsor Company has net temporary differences between tax and book accounting of $80
million, resulting in a deferred tax liability of $28 million. An increase in the tax rate would
have the following impact on deferred taxes and net income:

A. Option A

B. Option B

C. Option C

D. Option D

22. Exoil recorded an expense and corresponding liability to recognize potential losses relating to
an oil spill in 2006 of $10 million. Its net income for the year was $200 million. It was not able
to take a deduction for tax purposes until later years when it actually paid cash out in relation
to this event. In 2006, with respect to this, Exoil would have:

A. recognized a deferred tax liability.

B. recognized a tax loss carryforward.

C. recognized a deferred tax asset.

D. recognized a deferred equity loss.

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23. Which of the following statements is correct?

I. Tax loss carrybacks result in deferred tax assets.

II. Tax loss carryforwards result in deferred tax assets.
III. The tax valuation account is used to adjust deferred tax liabilities if it is "more likely than
not" that they will not result in increased future taxes.

A. I only

B. II only

C. III only

D. I and II

24. Which of the following will cause the reported effective tax rate to differ from the federal
statutory tax rate?

I. Foreign tax rates that are lower than federal statutory tax rate
II. Tax-exempt income
III. Different depreciation methods for tax and financial reporting purposes
IV. Foreign tax rates that are higher than federal statutory tax rate

A. I, II, and IV

B. I, II, and III

C. I and II

D. III only

6-10
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25. If a company changes the useful life of its assets from 10 years to 12 years, this will be
recorded as:

A. a nonrecurring gain.

B. an extraordinary item.

C. a change in accounting principle.

D. None of the above

26. If a company estimates that its expected return on pension plan assets will increase to 9.5%
from 9.0%, this would be considered:

A. an extraordinary gain.

B. a change in accounting principle.

C. a prior period adjustment.

D. a change in accounting estimate.

27. A company changes its depreciation method from an accelerated system to straight-line.
Which of the following would normally be true?

I. The change would be discussed in the auditor's report.

II. The cumulative effect of the change would appear, net of tax, on the income statement.
III. The change would appear in cash flow from operations as a cash inflow.
IV. The change would be mentioned in the footnotes.

A. I, II, III, and IV

B. I, II, and III

C. II and IV

D. I, II, and IV

6-11
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28. Which of the following is true with respect to extraordinary items?

I. Extraordinary items are recorded net of tax in income statement.

II. Extraordinary items, by definition, are probable and unusual in nature.
III. By definition, gains and losses from strikes are always extraordinary.
IV. By definition, gains and losses from sale of property, plant and equipment are never
extraordinary.

A. I and IV

B. I, III, and IV

C. II and IV

D. I, II, and III

29. Which of the following would be considered an extraordinary item?

I. Write-down of receivables
II. Gains on disposal of a business segment
III. Loss of inventory resulting from a fire
IV. Loss resulting from a strike

A. I and IV

B. I, III, and IV

C. III only

D. I, II, and III

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30. Which of the following items is not included in the calculation of net income but is included in
the calculation of comprehensive income?

A. Unrealized holding gain on available-for-sale marketable securities

B. Unrealized holding gain on trading marketable securities

C. Gain from early extinguishments of bonds

D. Gain arising from sale of available-for-sale marketable securities

31. Based on GAAP, which of the following is true of comprehensive income?

A. It should be reported as part of sales in the income statement.

B. It can be reported as part of statement of shareholders' equity.

C. It should be reported as a line item before earnings after tax in the balance sheet.

D. It should be reported as part of operating activities in the statement of cash flows.

32. Which of the following statements is incorrect?

A. Employee stock options are not recorded as an expense when granted if they are out-of-the
money under the intrinsic value method.

B. Employee stock options will not affect the share price of a company when exercised.

C. Employee stock options may reduce agency costs by more closely aligning interests of
stockholders and managers.

D. Employee stock options may increase the risk propensity of managers.

A company's net income is $100,000, and its weighted-average shares outstanding are 20,000.
During the year, the company issues 5,000 ESOs at an exercise price of $20.

6-13
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33. What will be the basic EPS if average stock price during the year is $35 and treasury shares
that can be purchased are 1,000?

A. $3

B. $6

C. $5

D. $4.17

34. What will be the basic EPS if average stock price during the year is $15 and treasury shares
that can be purchased are 6,000?

A. $3

B. $6

C. $5

D. $4.17

35. What will be the diluted EPS if average stock price during the year is $15 and treasury shares
that can be purchased are 6,000?

A. $3

B. $5

C. $6

D. $4.17

6-14
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36. What will be the diluted EPS if average stock price during the year is $35 and treasury shares
that can be purchased are 1,000?

A. $3

B. $5

C. $6

D. $4.17

37. Which of the following is not an extraordinary item?

I. Loss on abandonment of property

II. Gain on disposal of a business segment
III. Effect of a strike against a key supplier
IV. Write-down of deferred research and development costs

A. I and III

B. II and IV

C. I, II, and III

D. I, II, III, and IV

38. Which of the following overall accounting concepts has a number of exceptions under GAAP?

A. Historical cost

B. Transaction basis

C. Conservatism

D. Accrual accounting

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39. All other things being equal, when comparing expensing or capitalizing the R&D expenditures
(with straight-line depreciation), return on assets:

A. will decrease over time using capitalization.

B. will increase over time using capitalization.

C. will be constant using expensing.

D. will initially be higher under expensing.

40. The intrinsic value approach ignores two types of costs:

A. interest cost and opportunity cost.

B. opportunity cost and exercise cost.

C. interest cost and option cost.

D. carrying cost and interest cost.

True / False Questions

41. Economic income and accounting income are always the same.

True False

42. The matching principle in accounting prescribes that costs must be recognized in the same
period when the related revenues are recognized.

True False

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43. Revenue from sales where the buyer has the right of return can only be recognized after the
return period has expired.

True False

44. If two firms are identical except that one firm uses percentage-of-completion accounting and
the other uses completed contract accounting for revenue recognition, the cash flows of the
firms will be identical.

True False

45. Generally revenue should be recorded when it is probable and reasonably estimable.

True False

46. Revenues are earned inflows that arise from a company's ongoing business activities.

True False

47. Gains are earned inflows that arise from a company's ongoing business activities.

True False

48. Comprehensive income is computed by adjusting net income, on an after-tax basis, for certain
unrealized gains and losses.

True False

49. For item to be considered extraordinary, it should be either unusual in nature or infrequent in
occurrence.

True False

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50. For item to be considered a special item, it should be either unusual in nature or infrequent in
occurrence but not both.

True False

51. Accounting changes are usually cosmetic and do not yield cash flow consequences.

True False

52. A long-term asset is said to be impaired when its fair value is below its book value.

True False

53. Income from continuing operations is a measure that excludes certain nonrecurring items,
such as extraordinary items, and the effects of discontinued operations, from net income.

True False

54. Smythe Corporation is in the real estate development business. If they sell a piece of land for
$50,000 that they had previously purchased for $45,000, they should record a loss of $5,000.

True False

55. For companies in an expansion phase, capitalizing interest may result in higher earnings over
an extended period of time, compared to expensing interest.

True False

56. The capitalization of interest costs during construction increases future net income.

True False

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57. Software costs may be capitalized once a company can show that the product is
technologically feasible.

True False

58. A company that capitalizes costs, rather than expensing them will have a higher asset
turnover.

True False

59. If revenue is recognized for financial reporting purposes but deferred for tax purposes this
results in a deferred tax liability.

True False

60. If an expense is recognized for financial reporting purposes but not allowed as a bona-fide
deduction for tax purposes, this results in a deferred tax asset.

True False

61. Extraordinary items are defined as those that are both unusual in nature and infrequent in
occurrence. These items are disclosed, net of tax in the income statement.

True False

62. Accounting errors are considered accounting changes and treated accordingly.

True False

63. When a company disposes of a segment of its business, it must restate all prior year financial
statements as if it had never owned that segment of the business.

True False

6-19
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64. All other things equal, a company that capitalizes rather than expenses software development
costs, will have a less volatile net income.

True False

65. Comprehensive income reflects nearly all changes to equity, other than those from owner
activities (such as dividends and share issuances)

True False

66. If a company, operating in an inflationary environment, uses FIFO for tax purposes and
weighted-average for financial reporting purposes, this will result in a deferred tax asset.

True False

67. Deferred taxes arise due to temporary timing differences in recognizing items for tax and
financial reporting purposes.

True False

68. If a company depreciates an asset at a faster rate for tax purposes than for financial reporting
purposes this will give rise to a deferred tax liability.

True False

69. A deferred tax liability imposes an obligation on the business to pay taxes.

True False

70. Some items appear on a company's income statement but never appear on its tax return.

True False

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71. In order to determine permanent income for the year being analyzed, it is necessary to
consider special charges from other years.

True False

72. Timing is one of the few revenue recognition issues that are seldom a concern in financial
analysis.

True False

73. Only costs of materials, equipment, and facilities having alternative future uses (in R&D
projects or otherwise) are capitalized as tangible assets.

True False

74. Employee stock options (ESOs) usually constitute a wealth transfer from current shareholders
to prospective shareholders (employees) and have no effect on total liabilities and
shareholders' equity.

True False

75. Under long-term performance contracts—such as product warranty contracts and software
maintenance contracts—revenues are often collected in advance and are recognized
proportionally over the entire period of the contract.

True False

76. ESOs often are granted to managers in growth and innovative industries to induce more risk-
taking.

True False

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Essay Questions

77. Revenue Recognition from Long-Term Contract

Housing Construction Company (HCC) has agreed to build a housing project for the city of
New York. On January 1, 2006 the company and the city agreed on the following terms, the
construction should take no more than 3 years, HCC would be paid a total of $150 million for
the project; $150 million would be paid: 3 payments of $50 million each at the end of year
2006, 2007, and 2008. HCC expects contractions costs to be $50 million in year 2006, $50
million in year 2007, and $10 million in year 2008.

a. If HCC uses the completed contract method, what revenues and expenses would HCC
recognize in year 2006, 2007, and 2008?
b. If HCC uses the percentage-of-completion method, what revenues and expenses would
HCC recognize in year 2006, 2007, and 2008?
c. Show the balance on the construction-in-process account at the end of 2006, 2007, and
2008 (prior to the completion of the project) using both the completed contract and the
percentage-of-completion methods?

6-22
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78. Earnings per Share

The following information was obtained from Cyber Corporation's annual report.

a. Compute weighted-average number of common shares outstanding for the year.

b. Compute basic EPS.
c. Compute diluted EPS.

6-23
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79. Goodwill/Cash flows

The table below shows the differences in accounting treatments for goodwill in three selected
countries.

*Goodwill is tax deductible in the United States under limited circumstances, for the purposes
of this question, assume it is not.

Given a company that has recognized significant acquisition goodwill, identify the country
whose accounting and tax rules for goodwill would likely result in the highest valuation of the
company. Justify and explain your answer.

6-24
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80. Taxes

Below are selected portions from Quaker Oats' tax footnote in its X6 annual report.

Provisions for income taxes on income before cumulative effect of accounting change were as
follows:

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Required:

1a. What was the effective tax rate on all income for fiscal X6?
1b. What was the effective tax rate on foreign income for fiscal X6?

2a. How much did Quaker Oats record in deferred taxes for fiscal X6? Was this an asset or
liability?
2b. What was the major item contributing to the deferred tax for X6? Explain fully how this
arose.

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81. Deferred taxes

Many companies have significant deferred taxes. Deferred taxes are not always long-term
liabilities. For the categories below, state whether deferred taxes can arise in this category
and provide an example.

i. Current liabilities
ii. Long-term liabilities
iii. Stockholders' equity
iv. Current assets
v. Long-term assets

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82. Expensing versus Capitalizing

Companies can capitalize software development costs when the product is "technologically
feasible". Some companies never capitalize their software costs - for example, Microsoft.

Viderics, a software development company capitalizes those software costs allowed under
GAAP. The following information is taken from its financial statements.

a. If Viderics had not capitalized its software costs but expensed them instead what would
they have reported as software expense each year, assuming unamortized balance of software
costs was $35 in year X0?
b. What is the likely effect upon net income variability of expensing rather than capitalizing
software development costs?
c. How might income be manipulated under either of these two methods (expensing and
capitalizing)?

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83. Changes in accounting

You are reading the 2006 annual report of Curpen Corporation and you find the following
items in its footnotes.

a. The useful life of machinery has been increased from 10 to 15 years.

b. The expected rate of return on plan assets has been increased to 10% from 8%.
c. The company has started to capitalize small tools purchased beginning in 2006.

For each of the above, determine the effect (higher, lower, or unchanged) of the change on
the ratios listed below for the year 2006:

a. Debt-to-equity
b. Return on assets
c. Cash Flow from operations

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84. Employee Stock Options

XYZ Company issued 10,000 options to its CEO on January 1, 2006, at the prevailing market
price of $5 per share. The options were expected to vest over a 2-year period. The Black-
Scholes value of the option was valued at $2 per share. On December 31, 2007, the CEO
exercised all options. Market price on that day was $9 per share. Assume a 35% tax rate.

1. What will be the cumulative effect on the balance sheet as of December 31, 2007 before the
exercise of option?
2. What will be the cumulative effect on the balance sheet as of December 31, 2007 after the
exercise of option?

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Other documents randomly have
different content
 She just missed being upset that time, and part of the water which she
had shipped was flung over the gunwales as she righted. But she floated
there half swamped: labor with what frenzy they choose, the iron-muscled
Krooboys could not keep her under command; and the next roller sent the
whole company of them flying.

There is one piece of advice constantly dinned into a white man's ear on
the West Coast. "If in a surf-boat you see the boat boys jump overboard,
jump yourself also if you do not wish to have the boat on top of you."
Profoundly sound advice it is. But it has the disadvantage of presupposing
capability for obedience, and if (as frequently happens) the passenger is
dizzy and weak from sudden seasickness, then the leap may be neither
prompt nor well-aimed.

As to where Carter's fault occurred, I have no certain information. The

headman shrieked an order in his own barbarous tongue; the boat boys took
to water on either side like so many black frogs; the boat spilt, flinging far
two yellow gladstone bags and one limp passenger in soiled white ducks;
and, look how one would into that boiling hell of broken water, no red head
appeared.

On the glaring beach Swizzle-Stick Smith broke off from his overseeing
for a moment, and limped down into the smoke of the surf. He had a
chiquot in his hand, which is a whip made of the most stinging part of the
hippopotamus, and with it he slashed venomously at every black form that
scrambled out of the brine.

He screamed at them in their own tongue. "Get back, you black swine!
Get back, and fetch out my clerk. If you drown my clerk, I will drown you,
too. My last clerk died a year ago, and they have got me no other out here
since. I won't lose this one. Back, you bushmen!"

The chiquot had many terrors to the Krooboys, the water few. It was as
much out of forgetfulness as anything else that they had not brought their
passenger to shore with them. Besides, how were they to know that he
could not swim as well as themselves (that is, about as well as a seal can
swim)? But they were not above striking a bargain for their services. A
black head, served upon a white pother of creamy surf, gave tongue.
 "Oh, Smith. You give cash, suppose we fit for catch 'im?"

"You lib for beach with my clerk, and I dash you one whole box of gin.
Hurry up now, you thieves, or a shark will chop him, or else he'll drown."

Heads disappeared, and many pairs of black heels kicked upwards. The
old man hitched together his shabby pyjamas, and stared industriously at
the broken water through his eyeglass. "It's all very well for this K. O'Neill
to send out letters that the firm is going to double its business," he
grumbled, "but if they don't send me men that can get ashore in one piece,
how this factory at Malla-Nulla is going to buck up, I can't see. By Jove,
they've got him, the beggars. Red-headed chap, too. Well, I might have
saved that dash, I'm thinking. Men with red heads never seem to stand the
climate here for long. It will be a nuisance if the beggar pegs out within the
month, after I've spent a case of gin on him."

It was a very limp and bedraggled Carter that was brought ashore
presently by the Krooboys. He was held up by the heels, more Africano, to
let the Atlantic drain from his inside back into its proper place, but he did
not show any sign of consciousness till he had been lifted up and carried to
the shelter of the retail store.

Swizzle-Stick Smith limped beside him, puffing at his briar. "Beggar's

got an arm broken," he commented. "Just my luck. And K. O'Neill will
expect the work to be done just the same. Oh"—he said when the dripping
Krooboys had put down his guest on the counter—"so you've concluded to
come to your senses again?"

Carter shuddered and slowly opened his eyes. A brown cockroach,

horrible with dust, dropped from the rafter above onto his face.

"I'm afraid you've had rather a rough bout of it, landing, my lad. It's a
very bad beach to-day. There, don't move. You're all right. You'll feel a bit
queer yet."

"The boat upset——"

 "It did, most thoroughly. But you're now at Malla-Nulla factory in West
Africa, and I bid you welcome. I'm Mr. Smith, your commanding officer.
You'd like to lie still for a bit, perhaps?"

"Yes."

"Well, buck up, and you'll soon be all right. You needn't fancy you'll be a
candidate for a top-hat and a gun-case yet."

"For a which?"

The trader pointed with his pipe stem across the store to a wooden box
full of flintlock trade guns. "That's a gun case. Man's usually too long to fit
it comfortably, especially if he's as well-grown as you are. So we knock out
one end, and nail on an old top-hat. Then you can plant him in style."

The patient's mouth twitched with the corner of a smile. "A most tidy
custom," he said faintly. "But I say, could you do anything for my arm?
Sorry to trouble you, but it's most abominably painful."

"Your arm's broken, worse luck. I'll set it for you when I've got off this
cargo."

"I'd rather have a doctor. Will you send off to the M'poso for the doctor
there, please?"

The old man laughed and polished his eyeglass on a sleeve of his
pyjamas. "My lad, you don't understand. You've left the steamer now, and
her doctor's not the kind of fool to risk his own bones trying to get here with
the beach as bad as it is to-day. I don't suppose he mistakes you for a
millionaire. You came out in the second class, I suppose?"

"Yes."

"Then there you are. His responsibility ended when you left the steamer,
and ship's doctors don't come ashore on this Coast unless they're sure of
touching a big fat fee. Now you must just lie quiet where you are, and bite
on your teeth till I've some time for surgery. Trade comes first in West
Africa."

With which naked truth, Swizzle-Stick Smith relit his pipe, and went out
again into the brazen sunshine, and presently was hustling on the factory
boys at their cargo work with his accustomed eloquence and dexterity.

CHAPTER II
INTRODUCES MISS LAURA SLADE

If a white man in a West African factory volunteers details of his

previous history, all hearers are quite at liberty to believe or disbelieve, as
suits their whim; but if, on the other hand, no word about previous record is
offered, Coast etiquette strictly rules that none shall be asked for.

George Carter found even upon the surface of his superior officer at
Malla-Nulla factory much that was mysterious. There were moments when
Mr. Smith exhibited an unmistakable gentility; but these were rare; and they
usually occurred when the pair of them lunched en tête-à-tête at 11 o'clock,
and Smith had worked off his morning qualm, and had not commenced his
afternoon refreshment. With a larger audience he was one part cynic and six
parts ruffian; he was admitted to be the most skilful compounder of
cocktails on all that section of the West African seaboard; and he sampled
his own brews in such quantities, and with such impunity, as gave the lie to
all text-books on topical medicine.

His head was bald, and the gray hair on his face and above his ears was
either as short as clippers could make it, or else bristled with a two weeks'
growth. Day and night he wore more or less shrunken pyjamas, from the
neck buttonhole of which a single eyeglass dangled at the end of a piece of
new black silk ribbon. Carter guessed his age as somewhere between fifty
and fifty-five, and wondered why on earth Messrs. O'Neill and Craven kept
such a disreputable old person as the head of what might have been a very
prosperous factory.

Indeed, theories on this very point were already lodged in the older
man's brain. "It's this new partner, K. O'Neill, that I don't like the sound of,"
he explained to Carter one day. "By the way, who is he?"

"Don't know. As I told you I was staying with my father at the vicarage,
and I was engaged by wire the day before the M'poso sailed, and only
caught her by the skin of my teeth. There was nobody there to see me off,
and on the boat all they could tell me was that 'K.' came into the business
when the late head died."

"Old Godfrey, that was"—Swizzle-Stick Smith sighed—"poor old

Godfrey O'Neill! He was one of the best fellows going in the old days, not a
bit like the usual cut of palm-oil ruffian as we used to call the traders then.
And, my God! to think of my coming down to the grade of one of them
myself."

Again the subject cropped up when one of their rare mails came in.
"Here's expense!" grumbled Swizzle-Stick Smith. "Letters landed at our
Monk River factory, and sent on to Mulla-Nulla by special runner. K.
O'Neill's orders, the Monk River agent says. In the old days you could
always bet on the beach being too bad for the steamer to call twice out of
three times, and you weren't pestered with a mail more than once in six
months. That's mainly why I've stuck by O'Neill and Craven all these years.
Now this new man wants our output of kernels to be doubled by this time
next year, and hopes I'll take steps to work up the rubber connection. If I
can't see my way to do all this, will I kindly give my reasons in writing, and
if necessary forward same by runner to a steamer's calling point, so that
reply may be in Liverpool within six weeks at latest. What do you think of
that?"

"Oh, I should say it was reasonable enough from the Liverpool point of
view."

"Bah! There's not much of the Coast about you." He tore the letters into
shreds, and folded these carefully into pipe-lights. "Dear old Godfrey
trusted me up to the hilt, and this new fellow's got to learn to do the same,
or I shall resign my commission. If he understood anything about running
the office, he might know I should do all the work that was good for me."

"I'm sure you do," said Carter civilly. "I'm afraid I'm the slacker. You let
me have such an easy time of it whilst my arm was getting well, that I've
slid off into lazy ways. I must buck up, and if you'll load the work onto me,
Mr. Smith, you'll find I can do a lot more."

Swizzle-Stick Smith dried the perspiration from his eye socket, fixed his
glass into a firmer hold, and stared. "Well," he said at last, "you are a d—d
fool." And there the talk ended.

It was that same day that Carter had his first introduction to Royalty. He
was in the retail store—"feteesh," they call it on the Coast—weighing out
baskets of palm kernels, measuring calabashes of orange-colored palm oil,
judging as best he could the amount of adulterants the simple negro had
added to increase the bulk, and apportioning the value in cotton cloth,
powder, flintlock guns at twelve and six-pence apiece, and green cubical
boxes of Holland gin. Trade proceeded slowly. The interior of the feteesh
was a stew of heat and odors, and the white man's elaborate calculations
were none of the most glib. To knock some idea of the fairness of these into
the black man's skull was a work that required not only eloquence, but also
athletic power. The simple savage who did only one day's shopping per
annum was willing always to let the delights of it linger out as long as
possible, and all the white man's hustling could not drive the business along
at more than a snail's pace.

By Coast custom, work for Europeans starts in those cool hours that
know the daybreak, and switches off between eleven and twelve for
breakfast; and thereafter siesta is the rule till the sun once more begins to
throw a shadow. But on this particular day, when Swizzle-Stick Smith had
knocked out his pipe and turned in under his mosquito bar, Carter sluiced a
parrafin-can full of water over his red head by way of a final refreshment,
and went down once more from the living rooms of the factory to the heat
and the odors of the feteesh below.
 The sweating customers saw him come and roused up out of the purple
shadows, and presently the game of haggle was once more in full swing.

Carter had a natural gift for tongues, and was picking up the difficult
Coast languages to the best of his ability, but his vocabulary was of
necessity small, and a Krooboy stood by to translate intricate passages into
idiom more likely to penetrate the harder skulls. The Krooboy wore trousers
and singlet in token of his advanced civilization, and bore with pride the
name of White-Man's-Trouble.

There was a glut of customers that baking afternoon. High-scented trade

stuffs poured into the factory in pleasing abundance, and bundles of
European produce were balanced upon woolly craniums for transportation
through bush paths to that wild unknown Africa beyond the hinterland. The
new law of K. O'Neill allowed no lingering in the feteesh. Once a customer
had been delivered of his goods, and had accepted payment, White-Man's-
Trouble decanted him into the scalding sunshine outside, and bade him
hasten upon his ways. K. O'Neill had stated very plainly, in a typewritten
letter, that the leakage by theft was unpleasing to the directorate in
Liverpool, and must be stopped. K. O'Neill understood that the thefts took
place after a customer had spent all his cash on legitimate purchase, as then
all his savage intelligence was turned to pilfering. Carter, as the man on the
spot, recognized the truth of all this, and carried out the instructions to the
foot of the letter.

Mr. Smith warned him he would have trouble over it. "Ever since the
first factory came down to blight this Coast," Smith explained, "the boys
have been allowed to hang around the feteesh and steal what wasn't nailed
down. They look upon it in the light of a legitimate discount, and it's grown
up into a custom. Now in West Africa you may burn a forest, or blot out a
nation, or start a new volcano, and nobody will say very much to you, but if
you interfere with a recognized custom, you come in contact with the
biggest kind of trouble."

"Still," Carter pointed out, "these orders are definite."

"And you are the kind of fool that goes on the principle of 'obeying
orders if you break owners.' Well, go ahead and carry out instructions. I
won't interfere with you. I'd rather like to see this cocksure K. O'Neill get a
smack in the eye to cure his meddling. And for yourself, keep your weather
eye lifting, or some indignant nigger will ram a foot of iron into you. It's the
Okky-men I'd take especial care of if I were you. They've got their tails up a
good deal more than's healthy just now. I'm told, too, that their head witch
doctor wants his war drum redecorated." Mr. Smith grinned—"I don't want
to be personal, of course."

"Oh, don't mind me. So far I rather fail to understand what I've got to do
with the Okky City war drum."

"You see you carry round with you something that would make the very
best kind of heap-too-good ju-ju."

"Still I don't understand."

Swizzle-Stick Smith got up and stretched, and limped across to the door.
"It's that red head of yours, my lad," he said over his shoulder as he went
out. "Every witch doctor in West Africa that sees it will just itch to have it
amongst his ornaments. I'd dye it sky-blue if I were you, just for safety
sake."

This of course might be Mr. Smith's delicate irony, or again it might be

literally true. Carter had already been long enough in West Africa to know
that very unusual and unpleasant things can happen there; but that made no
change in his determination. K. O'Neill was perfectly right about the matter;
this pilfering ought to be stopped; and he felt convinced that White-Man's-
Trouble would help to see that justice was done. That particular Krooboy
was thievish himself, certainly, but he had a short way with any fellow
African who dared to be light-fingered.

So during all that hot morning, and all that sweltering afternoon,
merchant after merchant was shown out into the sunshine, and those who
chattered and would not go willingly were assisted by the strong right arm
of White-Man's-Trouble.

Just upon the time when siestas generally ended, that is, about four
o'clock, there came a burly Okky trader who swaggered up to the factory
with five carriers in his train laden down with bags of rubber.

Carter examined the evil smelling stuff, and cut open two or three of the
larger round lumps. The gentle savage had put in quite thirty per cent. of
sticks, and sand, and alien gum by way of makeweight, and was as petulant
as a child at having this simple fraud discovered. He still further disliked
the price that was offered; and when it came to making his purchases, and
he found that the particular spot-white-on-blue cotton cloth on which he had
built up his fancy was out of stock, the remaining rags of his temper were
frayed completely. For an unbroken ten minutes he cursed Carter, and
Malla-Nulla factory, and an unknown Manchester skipper in fluent Okky,
here and there embroidered with a few words of that slave-trader's Arabic,
which is specially designed as a comfort for the impatient, and when he had
accepted a roll of blue cloth spotted in another pattern, and was invited to
leave the feteesh, he held himself to be one of the worst used Africans on
the Dark Continent.

Carter, who was tired and hot, signed to his henchman. "Here, fire that
ruffian out," he said.

But White-Man's-Trouble affected to hear a summons from outside. "Dat

you, Smith? Yessar, I come one-time," said he, and bolted out through the
doorway.

"Here you," said Carter to the big Okky-man, "you follow that Krooboy
out of here. If I have to tell you a second time, there'll be trouble. Come,
now, git."

Carter's command of the native might be faulty, but the grammar of his
gestures was correct enough. What, go out of the feteesh before he chose?
The Okky-man had no idea of doing such a thing. He lifted his walking
spear threateningly, and snarled.

Simultaneously Carter put his right hand on the greasy counter and
vaulted. He caught the upraised spear with his other hand before his feet
had touched ground, and broke the blade close off by the socket; and a short
instant later, when he had found a footing, he carried his weight forward in
the same leap, and drove his right against the negro's left carotid, just
beneath the ear. The man went down as if he had been pole-axed.

Carter went outside and beckoned to the Okky-man's carriers. "Here,

you, come and carry your master outdoors"—the men hesitated—"or I'll
start in to handle you next." They did as they were bidden. And thereupon
Carter, with his blood now well warmed up, was left free to attend to
another matter elsewhere.

A noise of voices in disagreement, and the intermittent sounds of

scuffling had made themselves heard from the south side of the factory
buildings, and now there were added to these a woman's voice calling in
English for some one to help her, and then a sharp, shrill scream of
unmistakable distress.

Now, Carter was no knight-errant. He had set up the unknown K. O'Neill

as his model, and had told himself daily that he intended to meddle with
nothing in West Africa, philanthropic or otherwise, which would not
directly tend to the advancement of George Carter; but at the first moment
when they were put to the test, all these academic resolutions broke to
pieces. He picked up his feet and ran at speed through the sunshine, and as
he went a mist seemed to rise up before his eyes which tinged everything
red.

He felt somehow as he had never felt before; strangely exhilarated and

strangely savage; and when he arrived on the scene of the disturbance, he
was little inclined to weigh the consequences of interference. There was a
woman, white-faced and terror-stricken—he could not for the life of him
tell whether she was handsome or hideous. Negroes were handling her. On
the ground lay a pole hammock, in which presumably she had arrived. In
front of her was a fat negro, over whose head a slave held a gaudy gold and
red umbrella, and grouped around this fat one were eight or ten negro
soldiers, with swords slung over their shoulders, and long flintlock trade
guns in their hands.

The whole scene was, as I say, dished up to Carter's eyes in a red mist,
and this thinned and thickened spasmodically so that sometimes he could
see clearly what he was doing, and at other times he acted like a man
bewitched. But presently the red cleared away altogether, and he found
himself clutching the fat negro by a twist of the shoulder cloth, and
threatening to split his skull with a sword recently carried by one of the
man's own escort. The girl sat limp and white on a green case before them,
clearly on the edge of a faint, and round them all stood negro carriers and
Haûsa soldiery, frozen to inaction by the fat man's danger.

All human noises had ceased. Only the hot insect hum and the cool
diapason of the Atlantic surf droned through the silence. From the dull
upraised sword blade outrageous sunrays winked and flickered.

Upon this impasse came Swizzle-Stick Smith from the bush side of the
white factory buildings, polishing his eyeglass, and limping along at his
usual pace, and no faster. He removed his pipe, and wagged it at them.

"Upon my soul a most interesting picture! Just like a kid's fairy tale
book. Gallant young knight rescuing distressed damosel from the clutches
of wicked ogre, who incidentally happens to be the King of Okky as anyone
but a born fool could have guessed from his state umbrella, and one of the
firm's best customers. Kindly observe that I'm the good fairy who always
comes in on the last page to put things safe. Carter, I prithee sheath thy
virgin sword, and then for God's sake run away and drown yourself."

He had reached the group by this time, and took up in his own the damp
black hand of offended majesty, and shook it heartily. He broke out in a
stream of fluent Okky, and gradually the potentate's wrath melted. The King
still gesticulated violently, and apparently demanded Carter's red head upon
a charger as a prelude to truce, but Swizzle-Stick Smith was an old Coaster
and knew his man.

"Champagne," Mr. Smith kept on suggesting, "bubbly champagne with

plenty of Angostura bitters in it to make it bite. I call attention to your
Majesty's historic thirst. Come up into the factory, old Tintacks, and we'll
break up a case in honor of the day."

Finally the King, who being a West African king was necessarily a
shrewd man, decided that though vengeance would keep till another day,
Mr. Smith's champagne might not; and he let himself be led back to the
factory, and up the stair. He graciously accepted the most solid-looking of
the long chairs in the veranda, sat in it carefully, kicked off his slippers, and
tucked his feet beneath him. He waved away Mr. Smith's further speech.
"Oh, Smith," he said, "I fit for champagne-palaver, one-time," and loosened
the tuck of his ample waist-cloth to give space for the expected cargo. "No
damn use more talk-palaver now."

Outside in the sunlight the Haûsa soldiers had taken the cue from their
master, and dissolved away unobtrusively; the carriers were dismissed to
the Krooboys' quarters under the charge of White-Man's-Trouble, who, now
that the disturbance was over, bustled up with many protestations of sorrow
for his unavoidable absence, and Carter was left for further attendance on
his distressed damsel.

For the first time he found himself able to regard her critically; and he
was somehow rather disturbed to find before him a girl who was undeniably
beautiful. When he had rushed blindly in to the rescue, he had taken it for
granted that the person he saw so vaguely through that red mist was an
English or an American missionary woman in distress, and (to himself)
excused his mad lust for battle by picturing himself as the champion of the
Christian martyr beset by pagans.

The white missionary women of that strip of the Coast occasionally

quartered themselves at Malla-Nulla factory on their journeyings, in spite of
the very niggardly civility of Mr. Smith, and Carter had been much
impressed in the way beneficent Nature had safeguarded them by homely
features and unattractive mien from attack by the other sex. He could have
taken off his hat to one of these, and said:

"Most happy to have been of service to you, madam. Won't you come
into the factory and have a cup of tea?"

But this slim beauty in the frilled white muslins sent speech further and
further away from him the more that he looked at her. For the first time
since landing in Africa six months before he was ashamed of mildew-
stained pyjamas for afternoon wear, and disgusted with the yellow smears
of palm oil which bedaubed them. He was hatefully aware too that he had
let his razors rust in the moist Coast climate, and White-Man's-Trouble's
fortnightly efforts with the clippers had merely left his chin and head
covered with an obscene red bristle.

"... It would be ridiculous," the girl was murmuring, "merely to say

'thank you' for what you did, Mr. Carter. You see I know your name. News
about new-comers soon spreads amongst the other factories on the Coast
here. If you only knew how I dread that fearful King, you would understand
my gratitude. You see this isn't the first time he's tried to carry me off."

"I wish you'd mentioned it earlier," Carter blurted out, "and I'd have split
his dirty skull, trade or no trade."

She shook her head. "No, that wouldn't have done. There's the law to be
thought of even here. Besides, he's a King, and could let loose, so they say,
twenty thousand fighting men against the Coast factories, and wipe them
out. If only I could get away to some place he couldn't reach!" She shivered.
"If I stay on here at my father's factory, I'm bound to be caught and taken to
Okky City."

Carter's brown eyes opened in sheer surprise. "You speak of your father's
factory. Do you mean to say that you live here on the Coast?"

"At the Smooth River factory."

"What, Slade's place?"

"Yes, I'm Laura Slade. Couldn't you guess?"

"How could I?" Carter blurted out. "Mr. Smith told me that Slade's girl
—" And there he stopped, and could have bitten off his tongue for having
said so much.

She finished his sentence quietly, and, as it appeared, without

resentment. "Mr. Smith, I suppose, described me as a nigger."

Carter made no reply. His brown eyes hung upon her pretty face intently.

"Mr. Smith, of course, knew my father, and my mother, too, for that
matter, before I was born. My mother was a quadroon, and that makes me,
you see, one-eighth African."

"You did not arrange your pedigree any more than I did mine. If you
hadn't told me, I should never have guessed you weren't a full-blooded
European. And after all, what does it matter?"

"There speaks the man who has only been out on the Coast six months."

"Six months or six years," said Carter stoutly, "makes no difference so

far as I am concerned. We're neighbors, it appears, and I hope you will let
me be one of your friends. Miss Slade, will you take compassion on a very
lonely man and let him come over to Smooth River occasionally and see
you? I can't tell you how ghastly the loneliness has been with only the
Krooboys and Mr.—er—Swizzle-Stick Smith to talk to, though perhaps you
can guess at it by the way I've let my outward man run to seed."

She gave him her slim brown hand. "I take frankly what you offer," she
said. "If you let me become your friend, I shall count myself fortunate; you
see, after what you have done for me to-day we can hardly start from the
ordinary basis."

From there onwards their talk flowed easily. She had come over on a
business errand for her father, and Carter settled that quickly and promptly.
She went presently into the factory to rest after her long hammock ride, and
Carter seized upon the chance to dive into his own room. Therefrom he
emerged an hour later with a chin half-raw from recent shaving with a rusty
razor, and wearing creased white drill clothes and a linen collar that sawed
his neck abominably.

"I've arranged," he said, when next he saw her, "that you and I dine tête-
à-tête, if you don't mind, down under those palm trees yonder. The
mosquitos don't trouble down there just at sunset, and my boy, White-
Man's-Trouble, only tastes things when they're going back to the cook
house. It's mere prejudice to say he's had his filthy paw in every dish before
it comes to me. Oh, by the way, Mr. Smith and his Majesty of Okky ask you
to excuse them, as they have still more business to discuss before they can
break up their meeting."
 She laughed and understood him to a nicety. They slipped off into light
easy talk as though they had known one another all their lives, and there
was neither that narrow escape from tragedy behind them, nor Africa and
possible tragedy ahead. The girl was good comrade. The man was hardly
that. He too frankly devoured her with his eyes. And certainly, in her cool,
frilled muslin dress, and her big green sun hat she was pretty enough to
paint. Her hair was black assuredly, but her pale olive face was moulded in
curves of the most delicious. In England, and as an Englishwoman, she
would have been dark perhaps, though not noticeably so. Nine hundred and
ninety-nine English people out of the thousand would have commented on
her beauty only. In America—well, in America, she would at once have
been placed in that class apart.

But Carter, the recently imported Englishman, saw nothing save only her
beauty and her charm, and he behaved towards her as the English
gentleman behaves towards his equal. A man who had been longer in Africa
would have had the wisdom of one who had lived in the Southern States,
and have picked out the African blood at a glance, and, as is the way of men
who have eaten of the tree of that wisdom, would have ordered his civilities
accordingly.

CHAPTER III
THE KING WHO STOPPED THE ROADS

Mr. Smith was unsteady neither of speech nor foot, but an expert could
have diagnosed that he had been dining. The expert, however, unless he had
acquired his expertness near Malla-Nulla factory, would hardly have
guessed that Mr. Smith was the better (or worse) for at least half a case of
German champagne, generously laced with Angostura bitters.

He limped into Carter's bedroom, put his lamp down on the table, sat on
the chair beside the mosquito bar, and very carefully eased up the knees of
his shrunk pyjamas.
 "I say, Mr. Assistant, wake up."

Carter woke, and blinked at the glare of Mr. Smith's eyeglass.

"Don't get up, please. I apologize for waking you, my dear follow, but
since you turned in, you've been made a pawn in the great game of
diplomacy. The fate of empires trembles on your nod."

Carter roused up onto his elbow. "Don't you think the empires would
tremble no more if we left them over till to-morrow morning?"

"It would be most undiplomatic to leave them trembling too long. I can
tell you I have had a devilish hard time of it putting his Majesty to sleep. He
can carry his liquor like a man, and he'd a most royal way of seeing I drank
level with him. But he may wake up any minute. Put not your trust in the
sleep of kings, Mr. Carter."

"All right, sir. I'll make a note of that. I'll brew the gasolene, and when
the King wakes I'll stand by with soda-water and fusel oil, which I should
think will heal the breach between us."

"Don't you believe it for one instant. The King of Okky's a seasoned
vessel with a copper tummy, and you could no more thaw the wickedness
out of him with soda-water than you could bring the devil to a reformed
temperature in an ice machine. You must recognize, Mr. Carter, that both
the King of Okky and the devil have their little ways, and it's above your art
to change either of them very much. Question is, how much allegiance do
you think you owe to O'Neill and Craven?"

This was a change of front with a vengeance. But Carter took it coolly
enough. "That's an interesting point, sir. I hadn't reckoned it up before. But I
shouldn't like to give you an answer to so important a question about the
firm on the spur of the moment. So by your leave, I'll sleep over it, and tell
you in the morning."

"Sorry, but can't allow you the time, and as you don't seem to grasp the
fact, I must point out that the fate of this factory of O'Neill and Craven's at
Malla-Nulla depends on the august will of the King of Okky. His Portliness
also threatens to stop the roads which feed our other factories at Monktown
and Smooth River, though I don't think when it comes to the point he'll do
that. However, Burgoyne and Slade must see to those themselves. After the
way this new K. O'Neill's been treating me on paper, I'm not going to
concern myself with the general welfare of all the firm's factories on this
coast. But I am in charge of Malla-Nulla, and I'm going to preserve the
trade here from extinction if it can be managed."

Carter lifted the mosquito bar and got out of bed. "I'm afraid, sir, I must
ask you to come down to my level, and speak rather more plainly."

Swizzle-Stick Smith sat back resignedly in his chair, and dropped his
eyeglass to the end of its black watered silk ribbon. "Dulce et decorum est
pro factoria mori, though I don't suppose it will come to dying if you play
your cards right." Mr. Smith closed his eyes and evidently imagined that he
was uttering his next thought silently. "Keep the young beggar out of the
way of Slade's girl, too. By Gad, I'd no idea Laura would grow up such a
pretty child. If he'd been an ordinary clerk I wouldn't have minded, but the
lad's a gentleman by birth, and now he's done the gallant rescue business as
a start, he's just the sort of quixotic young ass to think he ought to go and
marry the girl as a proper capping for the romance. And that of course
would be the end of him socially."

"I say," Carter called out loudly, "Mr. Smith, do you know it's four
o'clock in the morning, and there are some dangerous chills about just now?
Don't you think you had better have a cigarette paper full of quinine by way
of a night cap, and then go to bed? It will be turning-out time in another
hour or so."

"Matches, please. My pipe's out. Ah, thank you, Mr. Carter. Well, as I
was saying, the King's awfully taken with that punkah you rigged for the
mess-room, and the water wheel you set up in the river to run it, and when I
showed him the native arrowheads, and the spears, and the execution axes
you'd made to sell to the curiosity shops at home, he began to change his
tune. By the time we'd got to the fifth bottle he'd given up asking for your
head in a calabash to take home with him, and before we'd finished the case
he'd offered you the post of Chief Commissioner of Works in Okky City,
with a salary in produce and quills of gold that'll work out to £1,000 a year."
 "That's very flattering."

"Yes, isn't it, when you remember how he started. The only question is,
will he keep his royal word when he's sober?"

"It's a nice point. Among other things I believe they're cannibals up in

Okky City."

"Oh, come now, Mr. Assistant, you mustn't malign my friend, the King,
too much. You need have no fears on that score. The Okky men have never
been known to eat anybody with a red head. The only thing you'd have to
funk would be sacrifice—with, of course, a most full and impressive
ceremony. So I think you'll go, eh? All for the sake of K. O'Neill, whom
you admire so much? And then the King won't stop the roads."

"No," said Carter shortly. "I have no intention of committing suicide at

present. But if I'm an embarrassment at Malla-Nulla, you may fire me, or
I'll resign if you wish it."

Swizzle-Stick Smith screwed his eyeglass into place and examined his
assistant with thoughtful care. "Shouldn't dream of letting you go, my dear
fellow. Always make a point of sticking by my officers. Just thought I'd let
you know of the King's offer in case his Majesty refers to it to-morrow.
There now, go to bed again, and don't dream the fighting's begun. You'll see
plenty of service over this affair without dreaming over it on ahead."

When Carter set out for the West Coast of Africa from the Upper
Wharfedale Vicarage, the one article in his kit which he thought suitable for
the Coast was a small-bore nickel-plated revolver, which he had picked up
second hand in Skipton for ten and six. It had been smuggled in without his
mother's knowledge, as there was no reason to add to her already great
anxiety. His father had provided half a sovereign towards the cost, had
advised him not to use the wretched thing except in case of necessity, but if
need arose, to take heed that he held it straight.

Of course on arrival he found, firstly, that the weapon was too small to
be of effective use; secondly, that he could not hit a mark six feet square at
more than a twelve-yard rise; and, thirdly, that revolvers are not really
articles of fashionable wear for clerks in West Coast factories, whatever
they may be in story-books. So the weapon lay in his mouldy portmanteau,
and the moist Coast climate changed its nickel dress for a good coat of
bright red rust.

But the morning after the King of Okky's arrival, while that bulky
potentate was still asleep in the factory, Carter went in, cleaned the revolver
as well as he could, and jammed cartridges into its reluctant chambers. He
carried it pirate-fashion for the remainder of that day inside the band of his
trousers, to his great personal discomfort, and to the vast enjoyment of Mr.
Smith. However, the truculent Okky soldiers who had deliberately shaken
weapons at him in the morning were reduced by the sight of it to a certain
surly civility, and work in the feteesh went on without any open rupture.

Mr. Smith was distinctly irritable when dawn came in with the morning
tea, but presently, when the swizzle-stick began its merry swishing in the
cocktail pitcher, he thawed into a pleasing geniality, which, by frequent
application of the same remedy, endured throughout the day. Laura Slade
had returned in her hammock by the beach road in the cool of the preceding
night, and Carter's thoughts followed her to Smooth River factory, to the
detriment of his work down in the feteesh. He gave no mental attention
whatever to the King of Okky who sat cross-legged in a long chair in the
factory veranda above him, but that bulky potentate kept returning with a
dogged persistency to the subject of George Carter.

"Oh, Smith," he kept on saying, "I savvy champagne palaver, n' I savvy
cocktail palaver, n' I fit for chop when chop-time lib. But I ask you for tell
me, one-time, if you fit for dash me dem Red-head that savvies machine-
palaver. If you no fit, I stop dem road, an' no more trade lib for Malla-
Nulla."

To which Mr. Smith, who knew his West Africa from a twenty-five
years' study of its men and customs, would reply with an unruffled geniality
that he was sure the King was far too good a heathen to try any such dirty
game as putting ju-ju on the factory of an old friend. "You're pulling my
leg, old Cockiwax," Mr. Smith would say. "I pray you cease, and you shall
have the best cocktail this pagan Coast has seen or sniffed."
 "Oh, Smith," the King would say, "I fit," and thereafter there would be
truce till the houseboy brought the ingredients, and Mr. Smith with his far-
famed skill compounded them, and the pink cocktails went their appointed
journey to perform their accustomed work. After which the African would
once more repeat his unwearied demand.

From the rising of the King from his mat, to the hour of the midday
meal, this demand and reply went on, and Swizzle-Stick Smith parried it
with unruffled serenity. But an open rupture very nearly came at the meal
time. As a king, the visitor was invited to sit at meat with the white men in
their mess-room. He said little during the meal, but he appraised Carter's
head so persistently with his eyes that that irritated young man, with the
pride of race bubbling within him, would have openly resented the
performance if he had not given a promise to Mr. Smith on this very point
only a short half-hour before.

Such a state of things could not last long without bringing about an open
breach, and Swizzle-Stick Smith, with his vast experience, saw this earlier
than anybody, and made his arrangements accordingly.

He tried hard to write a letter, but his pen was not in the mood for
intelligent calligraphy. So he had to fall back on verbal instructions and a
verbal message.

"Mr. Assistant," he said, when at last he put down his knife and fork, and
the houseboy handed him his pipe and a match, "Mr. Assistant, I intended to
make you a bearer of dispatches, but the gout's got into my confounded
fingers this morning, and I doubt if even Slade could read my writing. So
we'll just have to do the thing informally. We must have some more of that
spot-white-on-blue cloth, and you must post off to the Smooth River factory
and bring it back with you. It seems to be in heavy demand just now, though
why, I can't imagine. I've been on the Coast twenty-five years now, and I
can no more foretell the run of native fashions than I could the day I landed.
But there it is, and though I'm sure Slade won't want to part, you must just
make him. Say we'll pay him back in salt. He's sure to be short of salt. I
never yet knew Slade to indent for half as many bags of salt as his trade
required. You needn't hurry. If you're back here in three days' time that will
be quite soon enough. You can take a hammock, of course."
 "Thanks, very much, but I'd rather walk."

"Well, just as you please. You must commandeer what carriers you want
from Slade."

So it came to pass that when the sun had dropped to a point whence it
could throw a decent shadow, and the sea breeze mingled a bracing chill
even into a temperature of eighty, Carter set off along the beach, with
White-Man's-Trouble balancing a mildew-mottled Gladstone bag on his
smartly-shaved cranium, in attendance. On one side of him Africa was
fenced off by a wall of impenetrable greenery; on the other the Atlantic
bumped and roared and creamed along the glaring sand. On the horizon the
smoke of a Liverpool palm oil tank called from him the usual Coaster's
sigh.

"Oh, Carter," said his valet when they had left the factory buildings well
out of earshot, "you plenty-much fine, and you no lib for steamah."

"It was about time I tidied up. When we get back to the factory I'll teach
you how to pipe-clay shoes."

The Krooboy thought over this proposition for some minutes. Then said
he: "I fit for tell you, Carter, dem last white man I pipe-clay shoes for, he lib
for cemetery in two week. Savvy, Carter? Two week."

"All right, don't get so emphatic. I wasn't doubting you. But I'm going to
risk the cemetery all the same. You may start by providing me with one pair
of clean shoes a day, and when I get the taste of cleanliness again, maybe
I'll run to two. Savvy?"

"Savvy plenty," grumbled White-Man's-Trouble, and then presently.

"You no fit for steamah palaver? You no lib for home?"

"No, I'm not going home yet awhile."

"But you plenty-much fine."

 "Yes," admitted Carter, "I caught sight of myself in mildewed pyjamas
and a fortnight's beard, and was struck with the general filthiness of my
personal appearance. Savvy?"

"Savvy plenty. Oh, Carter, you lib for wife-palaver? Dem plenty-much
fine clothes always one of the customs before wife-palaver."

The Krooboy pondered over this discovery during the next two miles of
the march, and then said he, "Oh, Carter?"

"Well?"

"Dem Slade. You savvy seegar?"

"I suppose so. Why?"

"I see Smith dash dem Slade one box seegar an' he got what Slade said
'no fit' for before. Oh, Carter, you dash dem Slade one box seegar," said
White-Man's-Trouble, and he treated his employer to a knowing wink.

"Whatever for?"

"Because then, after he got dem seegar, he sell you Laura for half dem
price he ask before."

"You're an impertinent savage," said Carter half tickled, half annoyed.

But White-Man's-Trouble stopped, put down the yellow Gladstone bag

on the baking sand, and pointed to the blue parallel tribal tattoo marks
between his brows. "I Krooboy, sar. I no bushboy, sar! I lib for educate as
deckboy an' stan'-by-at-crane boy on steamah, sar. I no fit for stay with you,
sar, if you call me impertinent savage."

Carter stared. "Good heavens, man! I didn't intend to hurt your feelings."

White-Man's-Trouble waved the bleached inside of his paw towards his

master. "Oh, Carter, you apologize. Palaver set." He bowed a head which
was quaintly shaved into garden patches, replaced the Gladstone bag on its
central bed of wool, and once more strode cheerfully ahead.
 Carter followed moodily. How had they all guessed at his admiration for
Laura? He had thought it the most intimate of secrets, a delicate confidence
that he had no more than dared breathe even to his own inner
consciousness. But first old Smith had blurted it out, and now even his
servant talked about it openly. He had no doubt whatever that the whole
thing had been fully discussed over the cooking fires of the native
compound at Malla-Nulla the night before.

Then somehow his eyes swung round to the dancing horizon, and the
Liverpool steamer's smoke, boring up towards the North, easily ferried his
thoughts across the gap which lay between that baking African beach, and
the cool village tucked snugly in beneath the Upper Wharfedale moors. He
tried to concentrate his mind on the roses in the vicarage garden. His
mother liked abundance of blooms, and cared little about the size. The Vicar
admired big blooms and snipped off superfluous buds when his wife was
out of the way, and during summer a gentle wrangle over the roses was
quite one of the features of their quiet life.

But the roses refused to stay in the centre of the picture. Laura insisted
on taking their place. Suppose he took Laura back to Wharfedale—as Mrs.
George Carter. His mother, blessed woman, might be sorry, but she would
accept her. He was sure of that. But his father? Almost the last piece of
advice the Vicar had given on parting was:

"Now, lad, remember always you're a white man, and don't get mixed up
with any woman who owns a single drop of blood darker than your own. If
you do, you can never come back here, and you'll hate yourself all the rest
of your life. Remember I held an Indian chaplaincy before I got this living,
and I know what I'm talking about."

Carter shook a sudden fist at the steamer's smoke for supplying him with
such a distasteful train of thought, and turned for light conversation to
White-Man's-Trouble. That garrulous person was quite ready to humor him
in the matter.

The sea breeze died away a little after six, and they marched in
breathless heat till the cool land breeze took its place, and brought them
spicy odors of the inland trees. And always on one side of them the surf
roared, and crashed, and creamed along the beaches.

The sun drooped to the horizon and hurried beneath it in visible inches
of fall. Daylight went out. The colors were blotted from the sky, and the
stars lit up, one racing another to be first. The noises from the forest
changed in correspondence. From close at hand a leopard roared a greeting
to the darkness.

Night was fully dressed ten minutes after the sun had vanished. It was
after nine o'clock, and in the chill of a wet gray mist, that they reached
O'Neill and Craven's factory on the banks of Smooth River.

Now nine o'clock in the lonely factories of the Coast is usually bed time,
and Carter was a good deal surprised to hear the hum of a great activity
pulsing out into the night; and presently, when they came within eye-range,
to see the buildings aglow with lights. But there was a further surprise
packed and ready for him. As they came close, a black man leaned over the
end of an upraised wall of palm oil puncheons, and deliberately pointed a
gun squarely at Carter's chest.

A good deal of discussion took place afterward as to what would have

been the proper procedure under the circumstances, but that may
conveniently be omitted from this record, which deals only with immediate
history; and the fact is that Carter rushed the sentry, clipped him under the
ear, skinned his own knuckles, and captured the gun. White-Man's-Trouble
in the meanwhile had with much presence of mind thrown himself on his
face to avoid any discharge of pot-leg from the concealed marksmen, and
was bawling lustily for "Slade, oh Slade," to "Stop dem dam gun-palaver."
Which noisy request presently had its wished for result.

Slade himself came out to meet them, and even then his reception was
sufficiently startling. "Good God!" he rapped out, "then you've escaped,
too, Carter, as well as the Krooboy. What liars these niggers are! I imagined
that your—that parts of you were up at Okky City by now. I supposed
they've scuppered poor old Swizzle-Stick Smith all right, though? Did he
have a bad time of it? Why?" he said as he came nearer, and saw his caller's
spruce getup, "you don't look as if you'd been scrapping much. Or bolting
very hard, either," he added as an afterthought.

"Unless," said Carter, "you're referring to an invasion by the Turks, or

the French, or the Men in the Moon, I haven't a notion what you're talking
about."

"Haven't you come from Malla-Nulla?"

"Left there about a quarter to four."

"And hasn't it been sacked?"

"It was sitting down by the beach, looking just as white hot as usual, and
no more, when I left."

"What about the King of Okky, then?"

"He was there at Malla-Nulla, filling a very big chair on the veranda."

"And there has been no raid? I don't understand."

"The King of Okky," said Carter patiently, "has raided our factory to the
extent of one case of fizz, of which Mr. Smith says he drank half, but
barring that, and about six gallons of other mixed drinks, I didn't see him
get much out of us. He certainly was threatening to stop the roads when I
left, but I think that was all gas. He only wanted to stick Mr. Smith for more
drinks."

"He's stopped the roads right enough."

"Not he," said Carter cheerfully.

The older man thought a minute and then, "Come along with me," he
said. "I guess ocular demonstration is about the only thing that will
convince you that there is mischief in the air, and that that crafty old devil
of a king is at the bottom of it." He led to a factory outbuilding, threw open
a door, and scraped a match. "Look in there."
 Carter did so, and promptly felt sick, and came out. But he got another
light and returned resolutely to the inspection. "Two, four, seven. And all
killed the same way. I say that's pretty ghastly."

"Isn't it? They were all fine healthy Krooboys when they marched out of
here this morning, carrying up some salt bags to our sub-factory on the
Okky road. There were some bits of feathers and a rag or two strung up
alongside the path, and they didn't notice them, or didn't tumble to it that
they were ju-ju. Consequently they are now what you see. This is the King
of Okky's way of hinting that the road is stopped. That pot-leg must have
been fired at not more than a two-yard range. Some of the poor devils are
regularly blown inside out. Here, come into the open again."

"Thanks, you needn't give me the details over again. I saw all that for
myself."

"That infernal King must have sent off his messengers the very moment
after you had that turn-up with him about Laura—which, by the way, is a
thing that I personally shall never forget, so you can draw on me over that
down to the last breeches button. You see Okky City is closer in at the back
here, but it's quite five hours' march further from Malla-Nulla. So the
treacherous old brute stayed where he was, tippling with Smith, in the pious
hope of keeping you all quiet till his men could come down and blot you all
out. How you got through is a marvel to me. They must have reckoned on
getting you as you walked here along the beach or they'd never have let you
slip away. You and your boy have certainly escaped by the skin of your
teeth. It's a moral certainty that they've got old Smith."

"I don't think so. But I shall go back and see."

"Rubbish! We may be able to hold out here, and perhaps will not be
attacked at all when they find out we're ready for them. But it's perfectly
impossible for you to get back along the beach to Malla-Nulla. Come up
into the house, and we'll find you a bite of something to eat, and Laura shall
mix you a whiskey and soda. We've a bit of the last steamer's ice still left,
and you shall have it."
 "Thanks. I'll come up and see Miss Slade, but I shall start back for
Malla-Nulla in half an hour from now. And if, as you prophesy, I don't land,
well, at any rate, I shall have done my best to get there."

"It's very nice of you, and all that, but do you think old Smith is worth
it?"

Carter laughed. "Mr. Smith's a rough handful, but he's a good sort, and I
like him. Besides he happens to be a gentleman."

"Or was one once. A lot of us on the Coast were gentlemen originally. I
come of good people myself, and was at Eaton and Jesus, although I don't
suppose you'd have guessed it if I hadn't told you. But you see Nature built
me with a cutaway chin, and I couldn't hold down a job at home. However,
come in, and we'll scratch you up some chop. Here, Laura, I've brought a
caller."

"I feel this dreadful trouble is all my fault," said the girl as they came
into the lamplit room. "If you had been killed, Mr. Carter, I should have
looked upon myself as a murderess."

"My dear Miss Slade, you really mustn't worry about a matter you've no
concern in whatever. The whole thing's a 'regrettable incident'—I believe
that's the proper term—that Mr. Smith told me has been brewing for years.
It's all due to the drop in the price of palm oil on the Liverpool market,
which means that we white traders pay less for it on the Coast here, and the
black traders get less, and so there's less for the King of Okky to squeeze
out of them as they march through his territory from the hinterland. That's
what's put his fat back up. The only great mistake that's been made is that I
didn't split the old brute's iniquitous skull when I had the chance. I say, do
you mind my commenting on those flowers you've got on the table? I
haven't seen a cut flower since I left England."

He turned to his host. "You do the thing rather palatially here, Mr. Slade.
Board walls and real glass in the windows! We've bamboo walls at Malla-
Nulla that let in the dust and the mosquitoes and the Krooboys' stares just as
they occur. It felt rather like living in a bird-cage till one got used to it."
 "The walls are Laura's doing. You know she was at school in a convent
in Las Palmas, and came home with all sorts of extravagant notions. Why,
she actually insisted on a tablecloth for meals, and napkins. I'll trouble you,
napkins! And yet they still call us palm oil ruffians in Liverpool, and firmly
believe that we live on orange-colored palm oil chop, which we pick out of
calabashes with our fingers. I sent K. O'Neill a photograph of this room by
the last mail, with the table laid for chop, and flowers as you see in a china
bowl, in the hope he'd be impressed by it, and raise my screw."

"He's quite likely to do it, too," said Carter, "if I understand Mr. K. right.
He's always insisting in his letters to Malla-Nulla that if we make ourselves
comfortable, and adapt ourselves to the climate, we shall be able to do more
and better work. By the way, do you know Mr. K. O'Neill at all? At Malla-
Nulla we only know him on paper."

"I'm in the same box," Slade confessed. "Godfrey, his predecessor, of

course I knew well enough. But this new chap I only know from his letters,
and they're a deal too rousing for my easy-going tastes. Ah, here's the boy
with a tray of chop for you. Observe the parsley; that's Laura's latest
triumph in Coast gardening. Boy, Mr. Carter will sleep in the spare bed in
my room. See that there are no live things inside the mosquito bar."

"I thank you," said Carter firmly, "but I am going to do as I said."

"He wants to go back to Malla-Nulla," Slade explained to his daughter,

"and I tell him it is suicide to think of such a thing. Here, you have a go at
him, Laura." Slade always put off onto someone else anything which he
found hard to do himself.

But Laura Slade read a certain doggedness in Carter's face that told her
what to say. She did not join in imploring him to stay at Smooth River when
he had so obviously determined to go. But instead, her mind flew to some
scheme that might make his passage less desperately risky. "I am sure father
could spare you some men. With an escort you might get through. I wish
you were not so plucky."

Carter laughed. "Oh, I am frightened hard enough, but I should be still

more frightened at what I should think of myself if anything happened to
Mr. Smith which I could have prevented if I'd been there. It's very kind of
you to offer an escort, and I'd thought of that before; but I'm sure I shall be
able to move quicker and more quietly without one. But if Mr. Slade could
lend me a gun, I'd feel a lot more comfortable with that."

"Certainly, my boy, certainly. You shall have my Winchester, and I

believe I can scare up a revolver somewhere."

"You are very good. I have a revolver already, but it's only useful to me
as a sort of knuckleduster. I couldn't hit a haystack with it ten yards off.
Same with the rifle; I've never used one. But where I was brought up in
Wharfedale, you see, the Governor had some glebe, and his income was
small. We mostly lived on rabbits and a few grouse in the season, and so
you see I learned to be pretty useful with a shot gun."

Slade handed a weapon. "There you are. That's a double 12-bore hammer
gun, and both barrels are cylinders. It's an early Holland and was a swell
tool in its day, which was some time ago."

"Thank you very much. I hope I shan't have to use it, but it'll feel
comfortable under my arm. When you've lived most of your life in the
country, you miss going out with a gun. Well, now, I'll say good-by."

"Wait a minute till we've called up your boy. I'll shout from the veranda."

"Don't, please," said Carter, remembering that on all previous occasions

when trouble foreboded White-Man's-Trouble disappeared. He did not wish
to call Laura's attention more than necessary to the risks of the journey. "I'd
far rather go alone."

"Oh, Carter," said the voice of the Krooboy from the darkness outside,
"then you plenty-much dam fool. I say I lib for come with you to Malla-
Nulla. You no fit to go by your lone."

They looked out through the lit doorway and saw the yellows of White-
Man's-Trouble's eyes, and the gleam of his teeth, which latter were eclipsed
when he finished his speech, leaving the eyes alone to tell of his
whereabouts.
 "Now, that's a real stout boy of yours, Carter," the trader said. "Hi you,
come in. You fit for a peg?"

"I fit for a bottle," said White-Man's-Trouble, who looked nipped and
gray when he stood up in the lamplight. Poor fellow, he thought he was
going to certain death with perhaps torture as an addition, but when it came
to a pinch, and the white man led, he screwed up his pluck to follow.

So at last the pair of them set off quietly into the shadows. Two
handshakes were all the farewell, but there was a soft something in Laura's
eyes that sent queer thrills down George Carter's spine. Slade himself saw
them through the outer line of the sentries, and warned those enthusiasts not
to fire on them should they presently return; and a dozen yards away from
those sentries, they melted into the warm blackness of the African night.

Up on the veranda of the factory Laura Slade leaned over the rail and
listened to the beating of her own heart. She strained her eyes and she
strained her ears along the line of mysterious phosphorescence which
marked the beach, but no trace or hint did she get of how it fared with the
man she loved. Once only during that watch did she hear a sound which she
took to be a distant gunshot, and then, din, din, as though two other shots
followed it. Then the roar of the surf and the night noises of Africa closed in
again, and for safety or hurt Carter had passed beyond her reach.

"Kate will like that man," she said to herself, and then she shivered a
little. "I wonder if Kate will take him away from me?"

CHAPTER IV
THE BEACH BY MOONLIGHT

White-Man's-Trouble was abominably frightened during that night

march along the beach to Malla-Nulla, and did not mind showing it. Indeed,
the fact that he screwed up his determination sufficiently to make the trip at
all, says a great deal for his admiration of Carter.

Carter, on the other hand, though he was fully alive to the desperate risks
that lay ahead, felt himself to be the white man in command, and adjusted
his demeanor accordingly. To look at him one might have thought that he
was merely taking exercise and the evening air for the general good of his
health.

Had there been cover he would have taken it, but there was none. The
beach was the only path; the bush which walled it on one side was
impassable, and though the sea might have been considered an alternative
route, they had only cotton-wood dug-outs at the Smooth River factory, and
it would have taken at least a surf-boat to get out over the Smooth River
bar, to say nothing of landing, when the time came, through the rollers
which crashed always on Malla-Nulla beach. So he marched along where
the sand was wet and hard, just above the cream of surf, and he carried the
twelve-bore, hammers downwards, over his shoulder, with his forefinger on
the trigger guard above. He was very grateful for those past days of rabbit
shooting in Upper Wharfedale which had taught him to be so quick and
deadly on a sudden mark.

The surf on one side, and the night noises of Africa on the other, roared
in their ears as they marched, and every now and again they came into a
cloud of fireflies, which switched their tiny lamps in and out with
inconceivable rapidity, and left them quite blinded during the intervals of
darkness.

So that on the whole, as Carter realized very fully, if the King of Okky
had set men to waylay them, these could scarcely be incompetent enough to
miss their mark. But he did not admit this knowledge to White-Man's-
Trouble. When that Krooboy stated things exactly as they were, Carter
pooh-poohed his deductions lightly enough, and stormed at the man
because he was ignorant of the most approved method of pipe-claying
shoes.

An African moon floated cleanly overhead, and great African stars

punctured the purple roof of heaven, and to Carter's chilled fancy he and the
Krooboy were as conspicuous as two actors strutting under lime light. But
there were two things he overlooked, and these I believe must have been the
salvation of the pair of them. The thick night mists were steaming out of the
forest, and from the surf the thick white sea smoke drove in on the land
breeze to meet them. This translucent fog, though it might not be very
apparent to the eyes of the walkers themselves, would be quite enough to
screen them from the gaze of hostile pickets who, after the manner of
Africans, were already half scared out of their dusky skins by the fear of
ghosts.

They had made the journey out to Smooth River in five and a quarter
hours; they completed the journey back to Malla-Nulla in four, which meant
good travelling; and because a heavy march like this may not be undertaken
without physical payment in the stewy climate of the Coast, Carter felt
certain premonitory symptoms which told him that a good thumping dose of
fever would be his when once he slackened his efforts and gave it a chance
to take charge. But he was not much alarmed at the circumstance. As he told
himself coolly enough, either by the time the fever came on he would have
rejoined Mr. Smith at Malla-Nulla, who in that case was perfectly capable
of looking after him, or he would have rejoined Mr. Smith in the Shades
Beyond, and a fever owing to his body left behind on earth would not
matter. As it happened neither of these alternatives had to be bargained
with.

Malla-Nulla factory was eaves deep in white wet mist when they got to
it, and found it earthy-smelling and empty. It was unmarked by fire,
unsmirched by signs of battle, and, strangest of all, unlooted.

The pair of them charged up the veranda steps, Carter in the lead, with
the twelve-bore held ready for an instant discharge. The Krooboy with
matchet uplifted and teeth at the snarl looked the very picture of savage
desperation and ferocity. They stepped into the empty mess-room and lit
matches and a lamp. The land breeze sang through the bamboo walls, and
Carter's home-made punkah swished overhead to the unseen impulse of the
water wheel; but of quick human life, there was not a trace.

He had fitted up bells about the place, or rather strings that actuated
wooden clappers which could beat on wooden drums. He set these all a-
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