Financial Statements

  • May 2020
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T Accounts, Debits and Credits, Trial Balance, and Financial Statements

2

DEMONSTRATION PROBLEM Dr. Christy Russo maintains an office for the practice of veterinary medicine. The account balances as of September 1 are given below. All are normal balances.

Assets Cash Accounts Receivable Prepaid Insurance Automobile Furniture and Equipment Liabilities Accounts Payable Owner's Equity C. Russo, Capital C. Russo, Drawing

$ 2,459 18,120 980 20,650 5,963 1,590

Revenue Professional Fees Expenses Salary Expense Rent Expense Automobile Expense Utilities Expense Supplies Expense

$72,118

14,380 10,320 859 1,213 840

42,076 40,000

The following transactions occurred during September of this year. a. Paid rent for the month, $1,290. b. Paid $1,800 for one year’s coverage of liability insurance. c. Bought medical equipment on account from Bennett Surgical Supply, $849, paying $200 down with the balance due in thirty days. d. Billed patients for services performed, $9,015. e. Paid employee salaries, $1,797. f. Received and paid gas and electric bill, $112. g. Received cash from patients previously billed, $11,060. h. Received bill for gasoline for car, used only in the professional practice, from Garza Fuel Company, $116. i. Paid creditors on account, $1,590. j. Dr. Russo withdrew cash for personal use, $5,000.

Instructions 1. Correctly place plus and minus signs under each T account and label the sides of the T accounts as either debit or credit in the fundamental accounting equation. Record the account balances as of September 1. 2. Record the September transactions in the T accounts. Key each transaction to the letter that identifies the transaction. 3. Foot the columns. 4. Prepare a trial balance dated September 30. 5. Prepare an income statement for month ending September 30, 20–. 6. Prepare a statement of owner’s equity for month ending September 30, 20–.

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7. Prepare a balance sheet as of September 30, 20–.

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T Accounts, Debits and Credits, Trial Balance, and Financial Statements

=

Assets

Liabilities – + Debit Credit

– Credit

+ Debit Cash Bal. (g)

Bal.

+



2,459 (a) 11,060 (b) 13,519 (c) (e) (f) (i) (j)

1,290 1,800 200 1,797 112 1,590 5,000 11,789

(i)

+

Accounts Payable – + Bal. 1,590 1,590 (c) 649 116 (h) 2,355 765 Bal.

CHAPTER 2

Owner's Equity – + Debit Credit C. Russo, Capital – + Bal. 42,076 C. Russo, Drawing – + Bal. 40,000 5,000 (j) Bal. 45,000

+

Prepaid Insurance + – 980 Bal. 1,800 (b) 2,780 Bal.

Bal. (c) Bal.

Furniture and Equipment + – 5,963 849 6,812

Bal.

Automobile + – 20,650

ACCOUNT NAME

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DEBIT

Expenses + – Debit Credit Salary Expense + – Bal. 14,380 1,797 (e) Bal. 16,177 Rent Expense + – Bal. 10,320 1,290 (a) Bal. 11,610

Dr. Christy Russo Trial Balance September 30, 20– Cash Accounts Receivable Prepaid Insurance Automobile Furniture and Equipment Accounts Payable C. Russo, Capital C. Russo, Drawing Professional Fees Salary Expense Rent Expense Automobile Expense Utilities Expense Supplies Expense

+ Credit

Professional Fees – + Bal. 72,118 9,015 (d) Bal. 81,133

1,730

Accounts Receivable + – Bal. 18,120 (g) 11,060 9,015 (d) 27,135 Bal. 16,075



Revenue – Debit

CREDIT

1,730.00 16,075.00 2,780.00 20,650.00 6,812.00 765.00 42,076.00

Automobile Expense + – Bal. 859 116 (h) 975 Bal. Utilities Expense + – 1,213 Bal. 112 (f) 1,325 Bal.

45,000.00 81,133.00 16,177.00 11,610.00 975.00 1,325.00 840.00 123,974.00

Supplies Expense + – 840 Bal.

123,974.00

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CHAPTER 2

T Accounts, Debits and Credits, Trial Balance, and Financial Statements

Dr. Christy Russo Income Statement For the Month Ending September 30, 20—

Revenue: Professional Fees Expenses: Salary Expense Rent Expense Automobile Expense Utilities Expense Supplies Expense Total Expenses Net Income

$81,133.00 $16,177.00 11,610.00 975.00 1,325.00 840.00 30,927.00 $50,206.00

Dr. Christy Russo Statement of Owner's Equity For the Month Ending September 30, 20—

$42,076.00

C. Russo, Capital, September 1, 20— Net Income for September Less Withdrawals for September Increase in Capital C. Russo, Capital, September 30, 20 —

$50,206.00 45,000.00 5,206.00 $47,282.00

Dr. Christy Russo Balance Sheet September 30, 20— Assets $ 1,730.00 16,075.00 2,780.00 20,650.00 6,812.00

Cash Accounts Receivable Prepaid Insurance Automobile Furniture and Equipment

$48,047.00 Liabilities $

Accounts Payable

765.00

Owner's Equity C. Russo, Capital

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47,282.00 $48,047.00

4

T Accounts, Debits and Credits, Trial Balance, and Financial Statements

Copyright © Houghton Mifflin Company. All rights reserved.

CHAPTER 2

5

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