ACC 205 Week 1

Week 1 Quiz

E1-21 - Caren Smith, M.D

E1-21 Using the accounting equation to analyze transactions [1020 min]

Caren Smith opened a medical practice. During July, the first month of operation, the business, titled Caren Smith, M.D., experienced the following events:

Jul 6 Smith invested $55,000 in the business by opening a bank account in the name of C. Smith, M.D. The business gave capital to Smith.

9 Paid $46,000 cash for land.

12 Purchased medical supplies for $1,800 on account.

15 Officially opened for business.

1531 During the rest of the month, Smith treated patients and earned service revenue of $8,000, receiving cash.

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

30 Returned supplies purchased on the 12th for the cost of those supplies, $700.

31 Paid $1,100 on account.

Requirement

1. Analyze the effects of these events on the accounting equation of the medical practice of Caren Smith, M.D. Use a format similar to that of Exhibit 1-6, with headings for Cash; Medical supplies; Land; Accounts payable; and Smith, capital.

Ethical Issue 1-1 - Xiaping Trading Company

Ethical Issue 1-1 The board of directors of Xiaping Trading Company is meeting to discuss the past year's results before releasing financial statements to the bank. The discussion includes this exchange:

Wai Lee, company owner: This has not been a good year! Revenue is down and expenses are way up. If we are not careful, we will report a loss for the third year in a row. I can temporarily transfer some land that I own into the company's name, and that will beef up our balance sheet. Brent, can you shave $500,000 from expenses? Then we can probably get the bank loan that we need.

Brent Ray, company chief accountant: Wai Lee, you are asking too much. Generally accepted accounting principles are designed to keep this sort of thing from happening.

Requirements

1. What is the fundamental ethical issue in this situation?

2. How do the two suggestions of the company owner differ?

P2-30A - Doris Stewart

P2-30A Journalizing transactions, posting to T-accounts, and preparing a trial balance [4560 min]

Doris Stewart started her practice as a design consultant on September 1, 2012. During the first month of operations, the business completed the following transactions:

Sep 1 Received $42,000 cash and gave capital to Stewart.

4 Purchased supplies, $700, and furniture, $1,900, on account.

6 Performed services for a law firm and received $1,400 cash.

7 Paid $24,000 cash to acquire land for a future office site.

10 Performed service for a hotel and received its promise to pay the $1,000 within one week.

14 Paid for the furniture purchased September 4 on account.

15 Paid secretary's bi-monthly salary, $490.

17 Received cash on account, $400.

20 Prepared a design for a school on account, $700.

28 Received $2,100 cash for consulting with Plummer & Gorden.

30 Paid secretary's bi-monthly salary, $490.

30 Paid rent expense, $650.

30 Stewart withdrew cash of $3,000.

Requirements

1. Open the following T-accounts: Cash; Accounts receivable; Supplies; Furniture; Land; Accounts payable; Stewart, capital; Stewart, drawing; Service revenue; Salary expense; and Rent expense.

2. Record each transaction in the journal, using the account titles given. Key each transaction by date. Explanations are not required.

3. Post the transactions to the T-accounts, using transaction dates as posting references in the ledger accounts. Label the balance of each account Bal, as shown in the chapter.

4. Prepare the trial balance of Doris Stewart, Designer, at September 30, 2012.

Week 1 DQ2 Recording Business Transactions

Recording Business Transactions. Define the terms debit and credit. Explain how debits and credits affect the following: assets, liabilities, owners capital account, revenues and expenses.