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13 of 50Visit UMT online at www.umtweb.eduChapter 2, ACCT125
a. Dr. Landry deposits $6,000 in a bank a. Dr. Landry deposits $6,000 in a bank account in the name of Family Health account in the name of Family Health Care, P.C. in return for shares of stock Care, P.C. in return for shares of stock in the corporation.in the corporation.
a. Dr. Landry deposits $6,000 in a bank a. Dr. Landry deposits $6,000 in a bank account in the name of Family Health account in the name of Family Health Care, P.C. in return for shares of stock Care, P.C. in return for shares of stock in the corporation.in the corporation.
16 of 50Visit UMT online at www.umtweb.eduChapter 2, ACCT125
d. During the first month of operations, d. During the first month of operations, Family Health Care earns patient fees of Family Health Care earns patient fees of $5,500, receiving the amount in cash.$5,500, receiving the amount in cash.
d. During the first month of operations, d. During the first month of operations, Family Health Care earns patient fees of Family Health Care earns patient fees of $5,500, receiving the amount in cash.$5,500, receiving the amount in cash.
Capital StockCash + Land
Assets
Stockholders’
Equity= Liabilities + Notes Payable +=
d. 5,500 Revenue 5,500 Bal. 4,000 12,000 10,000 6,000
e. The expenses for the month were as follows: e. The expenses for the month were as follows: wages, $1,125; rent, $950; utilities, $450; wages, $1,125; rent, $950; utilities, $450; interest, $100; miscellaneous, $275.interest, $100; miscellaneous, $275.
e. The expenses for the month were as follows: e. The expenses for the month were as follows: wages, $1,125; rent, $950; utilities, $450; wages, $1,125; rent, $950; utilities, $450; interest, $100; miscellaneous, $275.interest, $100; miscellaneous, $275.
Capital StockCash + Land
Assets
Stockholders’
Equity= Liabilities + Notes Payable +=
e. –2,900 Wages expense –1,125Rent expense –950
Utilities expense –450Interest expense –100
Misc. expense –275
Retained Earnings
Bal. 9,500 12,000 10,000 6,000 5,500
Bal. 6,600 12,000 10,000 6,000 2,600
18 of 50Visit UMT online at www.umtweb.eduChapter 2, ACCT125
f. Family Health Care pays $1,500 to f. Family Health Care pays $1,500 to stockholder (Dr. Landry) as dividends.stockholder (Dr. Landry) as dividends.
f. Family Health Care pays $1,500 to f. Family Health Care pays $1,500 to stockholder (Dr. Landry) as dividends.stockholder (Dr. Landry) as dividends.
19 of 50Visit UMT online at www.umtweb.eduChapter 2, ACCT125
1. The effect of every transaction is an increase or a decrease in one or more of the accounting equation elements.
2. The two sides of the accounting equation are always equal.
3. The stockholders’ equity is increased by amounts invested by stockholders and by revenues. It is decreased by expenses and dividends. Let’s visualize this.
The following apply to all types The following apply to all types of businesses:of businesses:
Revenue and expense amounts taken from the Retained Revenue and expense amounts taken from the Retained Earnings column in Exhibit 2 of the textbook.Earnings column in Exhibit 2 of the textbook.
Revenue and expense amounts taken from the Retained Revenue and expense amounts taken from the Retained Earnings column in Exhibit 2 of the textbook.Earnings column in Exhibit 2 of the textbook.
Net income for September $2,600Less dividends 1,500Retained Earnings, September 30, 2003 $1,100
Family Health Care, P.C.Retained Earnings Statement
For the Month Ended September 30, 2003
The net income is taken from the income The net income is taken from the income statement (previous slide) and the amount of statement (previous slide) and the amount of
dividends from the Retained Earnings dividends from the Retained Earnings column in Exhibit 2 of the textbook.column in Exhibit 2 of the textbook.
The net income is taken from the income The net income is taken from the income statement (previous slide) and the amount of statement (previous slide) and the amount of
dividends from the Retained Earnings dividends from the Retained Earnings column in Exhibit 2 of the textbook.column in Exhibit 2 of the textbook.
Total assets equal total liabilities Total assets equal total liabilities plus stockholders’ equity.plus stockholders’ equity.
Total assets equal total liabilities Total assets equal total liabilities plus stockholders’ equity.plus stockholders’ equity.
Cash flows from operating activities:Cash received from customers $ 5,500Deduct cash payments for expenses 2,900Net cash flow from operating activities $ 2,600
Cash flows from investing activities:Cash payments for acquisition of land (12,000)
Cash flows from financing activities:Cash from sale of cap. stock $ 6,000Cash from notes payable 10,000 $16,000Deduct cash dividends 1,500Net cash flow from financing activities 14,500
Net increase in cash $ 5,100September 1, 2003 cash balance 0September 30, 2003 cash balance $ 5,100
Family Health Care, P.C.Statement of Cash Flows
For the Month Ended September 30, 2003
27 of 50Visit UMT online at www.umtweb.eduChapter 2, ACCT125
Use the cash basis of accounting for recording transactions and preparing financial statements for a second period of operations.
b. Paid expenses in cash as follows follows: b. Paid expenses in cash as follows follows: wages, $1,370; rent, $950; utilities, $540; wages, $1,370; rent, $950; utilities, $540; interest, $100; miscellaneous, $220.interest, $100; miscellaneous, $220.
b. Paid expenses in cash as follows follows: b. Paid expenses in cash as follows follows: wages, $1,370; rent, $950; utilities, $540; wages, $1,370; rent, $950; utilities, $540; interest, $100; miscellaneous, $220.interest, $100; miscellaneous, $220.
Capital StockCash + Land
Assets
Stockholders’
Equity= Liabilities + Notes Payable +=
e. –3,180 Wages expense –1,370Rent expense –950
Utilities expense –540Interest expense –100
Misc. expense –220
Retained Earnings
Bal. 11,500 12,000 10,000 6,000 7,500
Bal. 8,320 12,000 10,000 6,000 4,320
30 of 50Visit UMT online at www.umtweb.eduChapter 2, ACCT125
c. Family Health Care pays $1,000 to c. Family Health Care pays $1,000 to stockholders (Dr. Landry) as dividends.stockholders (Dr. Landry) as dividends.
c. Family Health Care pays $1,000 to c. Family Health Care pays $1,000 to stockholders (Dr. Landry) as dividends.stockholders (Dr. Landry) as dividends.
For the Month Ended October 31, 2003To review the source of To review the source of this amount, click the this amount, click the green button below.green button below.
To review the source of To review the source of this amount, click the this amount, click the green button below.green button below.
Revenue
To review the source of To review the source of expenses, click the orange expenses, click the orange
button below.button below.
To review the source of To review the source of expenses, click the orange expenses, click the orange
button below.button below.
Expenses
32 of 50Visit UMT online at www.umtweb.eduChapter 2, ACCT125
Describe the advantages and disadvantages of the cash basis of accounting.
45 of 50Visit UMT online at www.umtweb.eduChapter 2, ACCT125
Net sales $2,429,646Cost of sales 997,054Gross profit $1,432,592Selling and administrative exp. 919,236Operating income $ 513,356Other income (expense) 14,010Income before income taxes $ 527,366Income taxes 164,380Net income $ 362,986
46 of 50Visit UMT online at www.umtweb.eduChapter 2, ACCT125
Net sales $2,429,646Cost of sales 997,054Gross profit $1,432,592Selling and administrative exp. 919,236Operating income $ 513,356Other income (expense) 14,010Income before income taxes $ 527,366Income taxes 164,380Net income $ 362,986
47 of 50Visit UMT online at www.umtweb.eduChapter 2, ACCT125
Net sales $2,429,646Cost of sales 997,054Gross profit $1,432,592Selling and administrative exp. 919,236Operating income $ 513,356Other income (expense) 14,010Income before income taxes $ 527,366Income taxes 164,380Net income $ 362,986
48 of 50Visit UMT online at www.umtweb.eduChapter 2, ACCT125
Net salesCost of salesGross profitSelling and administrative exp.Operating incomeOther income (expense) Income before income taxesIncome taxesNet income