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-   -   Beginner Accounting Student CONFUSED! (https://www.askmehelpdesk.com/showthread.php?t=58211)

  • Jan 28, 2007, 07:54 PM
    Kelly_Egan
    Beginner Accounting Student CONFUSED!
    William Beard opens a medical practice titled William Beard, Professional Corp. He experienced the following events:

    Oct. 6: Beard invested $40,000 in the business, which in turn issued its common stock to him.

    Oct.9: The business paid cash for land costing $30,000. Beard plans to build an office building on the land.

    Oct. 12: The business purchased medical supplies for $2,000 on account.

    Oct.15: Company officially opened for business.

    Oct.15-31: During the rest of the month, Beard treated patients and earned service revenue of $8,000, receiving cash for half the revenue earned.

    Oct.15-31: The business paid cash expenses: employee salaries, $1,400; office rent, $1,000; utilities, $300.

    Oct.31: The business sold supplies to another physician for cost of $500.

    Oct.31: The business borrowed $10,000, signing a note payable to the bank.

    Oct.31: The business paid $1,500 on account.



    1) How much are the total assets?
    2) How much does the business expect to collect from patients?
    3) How much does the business owe in total?
    4) How much of the business's assets does Beard really own?
    5) How much net income or net loss did the business experience during its first month of operations?


    ================

    I can't seem to balance the Assets and Liabilities/Equity. I seriously can't figure out what I'm doing wrong... :confused:

    I did get number 1. I got $55,800. I can't get the other side to equal that. And I used all the numbers correctly...

    I think #2 is $8,000 (from looking at the Accounts Receivable column).

    I think #3 is $12,000 (adding the payables together).

    #4 is $45,300 (equity).

    #5 is $5,300 (net income formula).


    I really REALLY appreciate the help.

    -------------------------------------------------------------------


    No takers?? So I guess I'm not the only one who doesn't get it. That makes me feel better. I noticed I got a good rating... but I'd still like some help though........ *echo*
  • Jan 29, 2007, 11:20 PM
    muralitharan
    What is the definition for trial balance?
  • Jan 30, 2007, 10:42 PM
    CaptainForest
    Kelly,

    Quote:
    Originally Posted by Kelly_Egan
    Oct. 6: Beard invested $40,000 in the business, which in turn issued its common stock to him.
    Dr. Cash 40,000
    Cr. Common Stock 40,000

    Running Balance:
    B/S
    Cash 40,000
    Common Stock 40,000

    Quote:
    Originally Posted by Kelly_Egan
    Oct.9: The business paid cash for land costing $30,000. Beard plans to build an office building on the land.
    Dr. Land 30,000
    Cr. Cash 30,000

    Running Balance:
    B/S
    Cash 10,000
    Land 30,000
    Common Stock 40,000

    Quote:
    Originally Posted by Kelly_Egan
    Oct. 12: The business purchased medical supplies for $2,000 on account.
    Dr. Medical Supplies 2,000
    Cr. AP 2,000

    Running Balance:
    B/S
    Cash 10,000
    Medical Supplies 2,000
    Land 30,000
    AP 2,000
    Common Stock 40,000

    Quote:
    Originally Posted by Kelly_Egan
    Oct.15: Company officially opened for business.
    No Journal Entry required.

    Quote:
    Originally Posted by Kelly_Egan
    Oct.15-31: During the rest of the month, Beard treated patients and earned service revenue of $8,000, receiving cash for half the revenue earned.
    Dr. Cash 4,000
    Dr. AR 4,000
    Cr. Revenue 8,000

    Running Balance:
    B/S
    Cash 14,000
    A/R 4,000
    Medical Supplies 2,000
    Land 30,000
    AP 2,000
    Common Stock 40,000

    I/S
    Revenue 8,000

    Quote:
    Originally Posted by Kelly_Egan
    Oct.15-31: The business paid cash expenses: employee salaries, $1,400; office rent, $1,000; utilities, $300.
    Dr. Employee Salaries Expense 1,400
    Dr. Rent Expense 1,000
    Dr. Utilities Expense 300
    Cr. Cash 2,700

    Running Balance:
    B/S
    Cash 11,300
    A/R 4,000
    Medical Supplies 2,000
    Land 30,000
    AP 2,000
    Common Stock 40,000

    I/S
    Revenue 8,000
    Employee Salaries Expense 1,400
    Rent Expense 1,000
    Utilities Expense 300

    Quote:
    Originally Posted by Kelly_Egan
    Oct.31: The business sold supplies to another physician for cost of $500.
    Dr. Cash 500
    Cr. Supplies 500

    Running Balance:
    B/S
    Cash 11,800
    A/R 4,000
    Medical Supplies 1,500
    Land 30,000
    AP 2,000
    Common Stock 40,000

    I/S
    Revenue 8,000
    Employee Salaries Expense 1,400
    Rent Expense 1,000
    Utilities Expense 300

    Quote:
    Originally Posted by Kelly_Egan
    Oct.31: The business borrowed $10,000, signing a note payable to the bank.
    Dr. Cash 10,000
    Cr. Bank Loan 10,000

    Running Balance:
    B/S
    Cash 21,800
    A/R 4,000
    Medical Supplies 1,500
    Land 30,000
    AP 2,000
    Bank Loan 10,000
    Common Stock 40,000

    I/S
    Revenue 8,000
    Employee Salaries Expense 1,400
    Rent Expense 1,000
    Utilities Expense 300

    Quote:
    Originally Posted by Kelly_Egan
    Oct.31: The business paid $1,500 on account.
    Dr. AP 1,500
    Cr. Cash 1,500

    Running Balance:
    B/S
    Cash 20,300
    A/R 4,000
    Medical Supplies 1,500
    Land 30,000
    AP 500
    Bank Loan 10,000
    Common Stock 40,000

    I/S
    Revenue 8,000
    Employee Salaries Expense 1,400
    Rent Expense 1,000
    Utilities Expense 300


    QUESTION
    How much supplies do you have on hand at year end?

    You bought $2,000 and sold $500 to another physician, but did you not use some up while earning the $8,000 in revenue?

    I will assume you didn’t, since you didn’t mention it.


    FINAL BALANCES
    B/S
    Cash 20,300
    A/R 4,000
    Medical Supplies 1,500
    Land 30,000
    TOTAL ASSETS = 55,800

    AP 500
    Bank Loan 10,000
    Common Stock 40,000

    I/S
    Revenue 8,000
    Employee Salaries Expense 1,400
    Rent Expense 1,000
    Utilities Expense 300

    Quote:
    Originally Posted by Kelly_Egan
    1) How much are the total assets?
    Cash 20,300
    A/R 4,000
    Medical Supplies 1,500
    Land 30,000
    TOTAL ASSETS = 55,800

    Quote:
    Originally Posted by Kelly_Egan
    2) How much does the business expect to collect from patients?
    A/R 4,000

    Quote:
    Originally Posted by Kelly_Egan
    3) How much does the business owe in total?
    AP 500
    Bank Loan 10,000

    Owes a total of $10,500

    Quote:
    Originally Posted by Kelly_Egan
    4) How much of the business's assets does Beard really own?
    I take it to mean how much in equity is there?

    TOTAL ASSETS = 55,800

    TOTAL LIABILITIES = 10,500

    TOTAL EQUITY = $45,300

    Quote:
    Originally Posted by Kelly_Egan
    5) How much net income or net loss did the business experience during its first month of operations?
    I/S
    Revenue 8,000

    Employee Salaries Expense 1,400
    Rent Expense 1,000
    Utilities Expense 300
    TOTAL EXPENSES 2,700

    NET INCOME = $5,300
  • Jan 30, 2007, 10:46 PM
    CaptainForest
    Quote:
    Originally Posted by muralitharan
    what is the definition for trial balance?
    muralitharan,

    A trial balance is simply making sure that all of your debits equal all of your credits.

    It includes all accounts from both your balance sheet and income statement.

    If you have done all your Journal Entries correctly your trial balance should balance.

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