Reference no: EM131286341

Dr. Dolittle had a veterinary clinic. The following accounts and balances appeared on the books as of April 30, 2013:

 Cash                                        $22,000                    Notes Payable                     $10,000

   Accounts Receivable                   8,000                    Accounts Payable                   7,000

   Office Supplies                            2,000                    Contributed Capital             70,000 

   Land '                                        40,000                   Retained Earnings                 33,000

   Building                                     35,000                    Veterinary Service Revenue  70,000

  Office Fixtures and Equipment   27,000                    Advertising Expense               10,000

   Medical Instruments                  18,000                   Salary Expense                      28,000

The business transactions for May are shown below:

MAY

 

1 Dr. Dolittle invested $400,000 cash in the business in exchange for 5,000 shares of stock.

4 Additional land and a buildings were purchased for $150,000. Of this amount,$70,000 applied to the land, and $80,000 to the building. A cash payment of $90,000 was made at the time of the purchase, and a note payable was issued for the remaining balance.

9 Medical instruments were purchased for $130,000 cash.

16 Office fixtures and equipment were purchased for $50,000. Dr. Dolittle paid $20,000 at the time of purchase and agreed to pay the entire remaining balance in 15 days (account payable).

21 Office supplies expected to last several months were purchased for $5,000 cash.

24 Dr. Dolittle billed clients $9,200 for services rendered. Of this amount, $7,900 was received in cash, and the balance was billed on account (due in 30 days).

27 A $800 invoice was received for several radio advertisements aired in May. The entire amount is due to be paid on June 5. (Use accounts payable)

28 Received $6,500 from account receivable collected

29 Paid $5,500 of accounts payable that had become due.

31 Paid employees $4,200 for salaries earned by them in May.

See next page for instructions

INSTRUCTIONS:

A. Make up a T account for each account and put in the beginning balances as given above.

B. Prepare journal entries for each transaction (list date, then the accounts and amounts  debited and credited- in good form) For example, May 1
May

1         Cash     (+A)                     400,000

               Capital Stock  (+SE)                     400,000

 

4         ???????

                ??????

C. Analyze the effects that each of these transactions will have on the following six components of the company's financial statements for the month of May.
Organize your answer in tabular from, using the column headings shown below. Use I for increase, D for decrease, and NE for no effect. The May 1 transaction would be as follows:

                       Income Statement                         Balance Sheet

Transaction    Revenue  - Expense = NI         Assets = Liabilities + Owners' Equity

May 1         NE              NE          NE           I               NE                 I

 

             4

             etc.

D. Post each transaction from (B) to the appropriate T account.

E. Prepare a trial balance dated May 31, 2013. A trial balance lists all accounts in a column, then all debit balances opposite those with debit, all credit balances opposite those accounts with credit balances, and proves that total debits equal total credits.

F. Using figures from the trial balance prepared in part E, compute total assets, total liabilities, and owners' equity.

G. Did May appear to be a profitable month? (support your answer)