E1-21 Using the accounting equation to analyze transactions [10–20 min]

E1-21 Using the accounting equation to analyze transactions [10–20 min]

Caren Smith opened a medical practice. During July, the first month of operation, the business, titled Caren Smith, M.D., P.C. (Professional Corporation), experienced the following events:

ACC 205 Week 1 E1-21 - Caren Smith, M.D.

E1-21 Using the accounting equation to analyze transactions [10–20 min]

E1-21 Caren Smith opened a medical practice. During July, the first month of operation, the business, titled Caren Smith, M.D., experienced the following events:

Jul 6	Smith invested $55,000 in the business by opening a bank account in the name of C. Smith, M.D. The business gave capital to Smith
9	Paid $46,000 cash for land.
12	Purchased medical supplies for $1,800 on account.
15	Officially opened for business.
15–31	During the rest of the month, Smith treated patients and earned service revenue of $8,000, receiving cash.
29	Paid cash expenses: employees’ salaries, $1,600; office rent, $900; utilities, $100.
30	Returned supplies purchased on the 12th for the cost of those supplies, $700.
31	Paid $1,100 on account.

Requirement

1. Analyze the effects of these events on the accounting equation of the medical practice of Caren Smith,

M.D. Use a format similar to that of Exhibit 1-6, with headings for Cash; Medical supplies; Land; Accounts payable; and Retained earnings.

 

SOLUTION PREVIEW

Req. 1

Analysis of Transactions                                                                                                                                                                 Caren Smith, M.D.

		ASSETS	=	LIABILITIES +	OWNER’S EQUITY
DATE	CASH    +	MEDICAL   SUPPLIES +	LAND    =	ACCOUNTS      PAYABLE +	SMITH, CAPITAL	TYPE OF OWNER’S EQUITY TRANSACTION
July  6	55,000				55,000	Owner’s investment

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