Reference no: EM133234326

Question:

During February 2015, Claude Sample who operates a sports clinic presented the following for the first month of his company's operation:

Feb 1. Sample invested $55,000 in the business by depositing it into the company's bank account.

Feb 2. Paid $46,000 cash for land.

Feb 3. Purchased medical supplies for $1,800 on account.

Feb 4. Officially opened for business.

Feb 5. During the month, Sample treated patients and earned service revenue of $8,000, receiving cash.

Feb 6. Paid cash expenses: employees' salaries, $1,600; office rent, $900; utilities, $100.

Feb 7. Returned supplies purchased on the 3rd for the cost of those supplies, $700.

Feb 8. Paid $1,100 on account for purchases made on Feb 3.

Requirement:

1. Analyze the effects of these events on the accounting equation of the sports clinic. For example, the transaction increased asset and increased capital; the transaction increased expenses and decreased cash; the transaction increased asset and decreased asset; etc.
2. Prepare the journal entries to record the above transactions.

As a follow-up to the discussion question from week 3, the following errors were reported by Claude Sample Sports Clinic during the month:

1. An invoice for consultancy service provided to Running Track Club for $25,000 was left in a desk drawer unnoticed and had been omitted completely from the books. The records showed that a cash receipt for $15,000 was issued relating to this transaction while the balance was on account. The company records its consultancy fees in service revenue account.
2. Purchase of medical supplies on February 3 was for $18,000and not $1,800 as previously incorrectly reported.
3. On Feb 1 the $55,000 invested by Sample ought to have been allocated $45,000 bank account and $10,000 office equipment based on confirmation from the owner that the previous info provided was incorrectly stated.
4. Drawings of $1,000 were not recorded.
5. An electricity bill for $5,000 paid by cash was placed in a desk drawer and not presented with the first set of transactions. The company records its electricity charges in the utility expense account.

Required:

i. Record the journal entries necessary to correct each of the errors mentioned above. Narrations are not required

ii. Update the accounts and prepare the company's Trial Balance based on both sets of information provided.

iii. Prepare the following for the month of February 2015:

1. Income statement
2. Statement of owner's equity
3. Balance Sheet