Drs. Glenn Feltham and David Ambrose began operations of their physical therapy clinic, called Northland Physical Therapy, on January 1, 2017. The annual reporting period ends December 31. The trial balance on January 1, 2018, was as follows (the amounts are rounded to thousands of dollars to simplify): Account Titles Debit Credit Cash $7 Accounts Receivable 3 Supplies 3 Equipment 9 Accumulated Depreciation $1 Software 5 Accumulated Amortization 1 Accounts Payable 5 Notes Payable (short-term) 0 Salaries and Wages Payable 0 Interest Payable 0 Income Taxes Payable 0 Deferred Revenue 0 Common Stock 15 Retained Earnings 5 Service Revenue 0 Depreciation Expense 0 Amortization Expense 0 Salaries and Wages Expense 0 Supplies Expense 0 Interest Expense 0 Income Tax Expense 0 Totals $27 $27 Transactions during 2018 (summarized in thousands of dollars) follow: Borrowed $17 cash on July 1, 2018, signing a six-month note payable. Purchased equipment for $20 cash on July 2, 2018. Issued additional shares of common stock for $5 on July 3. Purchased software on July 4, $3 cash. Purchased supplies on July 5 on account for future use, $7. Recorded revenues on December 6 of $50, including $8 on credit and $42 received in cash. Recognized salaries and wages expense on December 7 of $25; paid in cash. Collected accounts receivable on December 8, $9. Paid accounts payable on December 9, $10. Received a $3 cash deposit on December 10 from a hospital for a contract to start January 5, 2019. Data for adjusting journal entries on December 31: Amortization for 2018, $1. Supplies of $3 were counted on December 31, 2018. Depreciation for 2018, $4. Accrued interest of $1 on notes payable. Salaries and wages incurred but not yet paid or recorded, $4. Income tax expense for 2018 was $4 and will be paid in 2019. PART 1 Record journal entries for transactions (a) through (j). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.) For each transaction use the Format below. (Note: Enter debits before credits.) 1.Record the borrowing $17 cash on July 1, 2018, signing a six-month note payable. Transaction General Journal Debit Credit a. [________________] [_______] [_______] 2.Record the purchase of equipment for $20 cash on July 1, 2018. Transaction General Journal Debit Credit b. [________________] [_______] [_______] 3.Record the issuance of additional shares of common stock for $5. Transaction General Journal Debit Credit c. [________________] [_______] [_______] 4.Record the purchase of software, $3 cash. Transaction General Journal Debit Credit d. [________________] [_______] [_______] 5.Record the purchase of supplies account for future use, $7. Transaction General Journal Debit Credit e. [________________] [_______] [_______] 6.Record the entry for revenues for 2018 of $50, including $8 on credit and $42 received in cash. Transaction General Journal Debit Credit f. [________________] [_______] [_______] 7.Record salaries and wages expense for 2018 of $25, paid in cash. Transaction General Journal Debit Credit g. [________________] [_______] [_______] 8.Record the collection of accounts receivable, $9. Transaction General Journal Debit Credit h. [________________] [_______] [_______] 9.Record the payment of accounts payable, $10. Transaction General Journal Debit Credit i. [________________] [_______] [_______] 10.Record the receipt of $3 cash deposit from a hospital for a contract to start January 5, 2019. Transaction General Journal Debit Credit
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Drs. Glenn Feltham and David Ambrose began operations of their physical therapy clinic, called Northland Physical Therapy, on January 1, 2017. The annual reporting period ends December 31. The
Account Titles Debit Credit
Cash $7
Supplies 3
Equipment 9
Software 5
Accumulated Amortization 1
Accounts Payable 5
Notes Payable (short-term) 0
Salaries and Wages Payable 0
Interest Payable 0
Income Taxes Payable 0
Deferred Revenue 0
Common Stock 15
Service Revenue 0
Depreciation Expense 0
Amortization Expense 0
Salaries and Wages Expense 0
Supplies Expense 0
Interest Expense 0
Income Tax Expense 0
Totals $27 $27
Transactions during 2018 (summarized in thousands of dollars) follow:
- Borrowed $17 cash on July 1, 2018, signing a six-month note payable.
- Purchased equipment for $20 cash on July 2, 2018.
- Issued additional shares of common stock for $5 on July 3.
- Purchased software on July 4, $3 cash.
- Purchased supplies on July 5 on account for future use, $7.
- Recorded revenues on December 6 of $50, including $8 on credit and $42 received in cash.
- Recognized salaries and wages expense on December 7 of $25; paid in cash.
- Collected accounts receivable on December 8, $9.
- Paid accounts payable on December 9, $10.
- Received a $3 cash deposit on December 10 from a hospital for a contract to start January 5, 2019.
Data for
- Amortization for 2018, $1.
- Supplies of $3 were counted on December 31, 2018.
- Depreciation for 2018, $4.
- Accrued interest of $1 on notes payable.
- Salaries and wages incurred but not yet paid or recorded, $4.
- Income tax expense for 2018 was $4 and will be paid in 2019.
PART 1
Record journal entries for transactions (a) through (j). (If no entry is required for a transaction/event, select "No
For each transaction use the Format below. (Note: Enter debits before credits.)
1.Record the borrowing $17 cash on July 1, 2018, signing a six-month note payable.
Transaction General Journal Debit Credit
a. [________________] [_______] [_______]
2.Record the purchase of equipment for $20 cash on July 1, 2018.
Transaction General Journal Debit Credit
b. [________________] [_______] [_______]
3.Record the issuance of additional shares of common stock for $5.
Transaction General Journal Debit Credit
c. [________________] [_______] [_______]
4.Record the purchase of software, $3 cash.
Transaction General Journal Debit Credit
d. [________________] [_______] [_______]
5.Record the purchase of supplies account for future use, $7.
Transaction General Journal Debit Credit
e. [________________] [_______] [_______]
6.Record the entry for revenues for 2018 of $50, including $8 on credit and $42 received in cash.
Transaction General Journal Debit Credit
f. [________________] [_______] [_______]
7.Record salaries and wages expense for 2018 of $25, paid in cash.
Transaction General Journal Debit Credit
g. [________________] [_______] [_______]
8.Record the collection of accounts receivable, $9.
Transaction General Journal Debit Credit
h. [________________] [_______] [_______]
9.Record the payment of accounts payable, $10.
Transaction General Journal Debit Credit
i. [________________] [_______] [_______]
10.Record the receipt of $3 cash deposit from a hospital for a contract to start January 5, 2019.
Transaction General Journal Debit Credit
j. [________________] [_______] [_______]
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