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., P.C. (Professional Corporation), experienced the following events:
July 6 Smith invested $55,000 in the business by opening a bank account in the name of C. Smith, M.D., P.C. The corporation issued common stock 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.
1. Analyze the effects of these events on the accounting equation of the medical practice of Caren Smith, M.D., P.C. Use a format similar to that of Exhibit 1-6, with headings for Cash, Medical supplies, Land, Accounts payable, Common stock, and Retained earnings.