Using the accounting equation to analyze transactions
Caren Smith opened a medical practice. During July, the first month of operation, the business, titled Caren Smith, M.D., experienced the following events:
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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. |
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9 |
Paid $46,000 cash for land. |
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12 |
Purchased medical supplies for $1,800 on account. |
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15 |
Officially opened for business. |
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15–31 |
During the rest of the month, Smith treated patients and earned service revenue of $8,000, receiving cash. |
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29 |
Paid cash expenses: employees” salaries, $1,600; office rent, $900; utilities, $100. |
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30 |
Returned supplies purchased on the 12th for the cost of those supplies, $700. |
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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 Smith, capital.