Problem 3.5A Dr.Schekter, DVM

PROBLEM 3.5A DR. SCHEKTER, DVM 60 Minutes, Strong a. Income Statement Transaction May 1 May 4 May 9 May 16 May 21 May 24 May 27 May 28 May 31 Revenue Expenses = NE NE NE NE NE I NE NE NE NE NE NE NE NE NE I NE I Balance Sheet Net Income Assets NE NE NE NE NE I D NE D P3.5A I I NE I NE I NE NE D Liabilities = NE I NE I NE NE I NE NE Owners' Equity I NE NE NE NE I D NE D PROBLEM 3.5A DR. SCHEKTER, DVM (continued) b. General Journal 2011 Ma y 1 Cash 400,000 Ca p ital Stock Issued 5,000 shares of capital stock. 400,000 4 Land Building Cash Notes Pa y able Purchased land and building. 70,000 180,000 9 Medical Instruments Cash Purchased medical instruments. 130,000 16 21 24 27 28 100,000 150,000 130,000 Office Fixtures and Equipment Cash Accounts Pa y able Purchased fixtures and equipment. 50,000 20,000 30,000 Office Supplies Cash Purchased office supplies. 5,000 Cash Accounts Receivable Veterinar y Service Revenue Recorded veterinary service revenue earned. 1,900 300 5,000 2,200 Advertising Expense Accounts Pa y able Recorded advertising expense incurred in May. 400 Cash 100 400 Accounts Receivable Collected cash for May 24 services. 31 100 Salary Expense Cash Paid May salary expense. 2,800 2,800 P3.5A (p.2) PROBLEM 3.5A DR. SCHEKTER, DVM (continued) c. May 1 May 24 May 28 May 31 Bal. Accounts Receivable 300 May 28 May 24 May 31 Bal. Notes Payable May 4 100,000 130,000 20,000 5,000 2,800 100 200 May 31 Bal. May 31 Bal. 150,000 Accounts Payable May 16 May 27 May 31 Bal. 30,000 400 30,400 5,000 May 31 Bal. Medical Instruments 130,000 May 9 Veterinary Service Revenue May 24 130,000 Office Fixtures and Equipment 50,000 May 31 Bal. May 27 Advertising Expense 400 May 31 Bal. 50,000 May 31 Bal. May 4 Land 70,000 May 31 May 31 Bal. 70,000 May 31 Bal. 2,800 May 4 Building 180,000 May 31 Bal. 180,000 P3.5A(p.3) 150,000 May 31 Bal. Ca pital Stock May 1 Office Supplies 5,000 May 21 May 16 Cash 400,000 May 4 1,900 May 9 100 May16 May 21 May 31 144,200 400 Salary Expense 2,800 400,000 400,000 2,200 2,200 d. PROBLEM 3.5A DR. SCHEKTER, DVM (continued) DR. SCHEKTER, DVM Trial Balance May 31, 2011 $ Cash Accounts receivable Office supplies 144,200 200 5,000 Medical instruments Office fixtures and equipment 130,000 50,000 Land Building Notes payable 70,000 180,000 $ Accounts payable Capital stock 150,000 30,400 400,000 Retained earnings Veterinary service revenue Advertising expense 0 2,200 400 Salary expense $ P3.5A(p.4) 2,800 582,600 $ 582,600 PROBLEM 3.5A DR. SCHEKTER, DVM (concluded) e. Total Assets: Cash Accounts receivable Office supplies Medical instruments Office fixtures and equipment Land Buildin g Total assets $ Total Liabilities: Notes payable Accounts p ay able Total liabilities Total Owners' E q uity: Total assets - total liabilities $ 144,200 200 5,000 130,000 50,000 70,000 180,000 $ 579,400 $ 180,400 $ 399,000 $ 2,200 $ 3,200 (1,000 ) 150,000 30,400 ($579 ,400 - $180 ,400 ) As shown below, the business was not profitable in its first month of operations: Veterinary service revenue $ Less: Advertising expense Salar y ex pense Net loss Note to instructor: It is not uncommon for new small businesses to initially report a net loss from operations. In this particular situation, there were so few revenue and expense transactions in May that it is difficult, if not impossible, to draw any conclusions about the expected performance of the veterinary clinic in the future. P3.5A (p.5) 400 2,800 $