1P - Intermediate Accounting (Kieso)

Question

Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September.

Sep. 1	Kawabata begins practice as a dentist and invests \(20,000 cash
2	Purchases dental equipment on account from Green Jacket Co. for \)17,280
4	Pays rent for office space, \(680 for the month.
4	Employs a receptionist, Michael Bradley
5	Purchases dental supplies for cash, \)942
8	Receives cash of \(1,690 from patients for services performed
10	Pays miscellaneous office expenses, \)430.
14	Bills patients \(5,820 for services performed.
18	Pays Green Jacket Co. on account, \)3,600.
19	Withdraws \(3,000 cash from the business for personal use.
20	Receives \)980 from patients on account
25	Bills patients \(2,110 for services performed
30	Pays the following expenses in cash: salaries and wages \)1,800; miscellaneous office expenses \(85.
30	Dental supplies used during September, \)330.

 

Instructions 

1. Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Owner’s Capital, Service Revenue, Rent Expense, Office Expense, Salaries and Wages Expense, Supplies Expense, Depreciation Expense, and Income Summary. Allow 10 lines for the Cash and Income Summary accounts, and 5 lines for each of the other accounts needed. Record depreciation using a 5-year life on the equipment, the straight-line method, and no salvage value. Do not use a drawing account.
2. Prepare a trial balance
3. Prepare an income statement, a statement of owner’s equity, and an unclassified balance sheet.
4. Close the ledger
5. Prepare a post-closing trial balance.

Step-by-Step Solution

Answer

Part a) and d) T – account ledger with closing balance in step 2

b) Trial balance total is $40,588

c) Net income determined by preparing an income statement is $6,007, 

   

Statement of Owners' equity shows owner's capital on 30 September is $23,007  

The balance sheet total is $36,687

e) The total of Post-closing trial balance is $36,975

Step 1: Meaning of Trial Balance

A worksheet used in bookkeeping is the trial balance. In this, each record’s balance is included to form aggregates for the credit and debit account columns that are always equal.

Step 2: (a and d) Preparing beginning transaction in T-ledger account and also closing it.

Dr.

Cash

Cr.

Sep. 1	20,000	Sep. 4	680
8	1,690	5	942
20	980	10	430
		18	3,600
		19	3,000
		30	1,800
		30	85
30 Balance	12,133

Dr.	Account Receivable	Cr.
Sep. 14	5,820	Sep. 20	980
25	2,110
Balance 30	6,950

 

Dr.	Rent expense	Cr.
Sep. 4	680	Sep. 30	680

 

Dr.	Supplies	Cr.
Sep. 5	942	Sep. 30	330
Balance   30	612

 

Dr.	Office expense	Cr.
Sep. 10	430	Sep. 30	515
30	85
	515		515

 

Dr.	Salaries and wages expense	Cr.
Sep. 30	1,800	Sep. 30	1,800

 

Dr.	Supplies expense	Cr.
Sep. 30	330	Sep. 30	330

 

Dr.	Equipment	Cr.
Sep. 2	17,280

 

Dr.	Owner’s capital	Cr.
Sep. 19	3,000	Sep. 1	20,000
		30	6,007
		Balance 30	23,007

 

Dr.	Account Payable	Cr.
Sep. 18	$3,600	Sep. 2	17,280
		Balance 30	13,680

 

Dr.	Service Revenue	Cr.
Sep. 30	$9,620	Sep. 8	1,690
		Sep. 14	5,820
		25	2,110
	9,620		9,620

 

Dr.	Accumulated Depreciation	Cr.
		Sep. 30	288

 

Dr.	Depreciation	Cr.
Sep. 30	288	Sep. 30	288

 

Dr.	Income Summary	Cr.
Sep. 30	680	Sep. 30	9,620
30	515
30	1,800
30	330
30	288
30	6,007
	9,620		9,620

Step 3: (b) Preparing trial balance

Yasunari Kawabata, D.D. S                                                                           Trial Balance

Debit ($)

Credit ($)

Cash	$12,133
Account receivable	6,950
Supplies	612
Equipment	17,280
Accumulated Depreciation-Equipment		$288
Accounts payable		13,680
Owners Capital		17,000
Service Revenue		9,620
Rent expense	680
Office expense	515
Salaries and Wages expense	1,800
Supplies expense	330
Depreciation expense	288
Totals	$40,588	$40,588

Step 4: (c) Preparing an income statement, a statement of owners’ equity, and an unclassified balance sheet.

Preparing Income Statement

Yasunari Kawabata, D.D. S                                                                    Income Statement

Service revenue	$9,620
Expenses:
Salaries and wages expenses                                            $1,800
Rent expense                                                                              680
Supplies expense                                                                       330
Depreciation expense                                                                 288
Office expense                                                                            515
Total expenses	3,613
Net Income	$6,007

Preparing a statement of owners’ equity

Yasunari Kawabata, D.D. S Statement of Owners’ Equity
Owners’ capital September 1	$20,000
Add: Net Income of September	6,007
	26,007
Less: Withdrawal by owner	3,000
Owners’ capital September 30	$23,007

 

Preparing balance sheet

Yasunari Kawabata, D.D. S Balance Sheet
Assets	Amount $	Liabilities and owners’ Equity	Amount $
Cash	$12,133	Accounts payable	$13,680
Account receivable	6,950	Owners Capital	23,007
Supplies	612
Equipment	17,280
Accumulated depreciation-Equipment	(288)
Total asset	$36,687	Liabilities and owners’ Equity	$36,687

Step 5: Preparing a post-closing trial balance

Yasunari Kawabata, D.D.S Post-Closing Trial balance
	Debit ($)	Credit ($)
Cash	$12,133
Accounts receivable	6,950
Supplies	612
Equipment	17,280
Accumulated depreciation-equipment		$288
Accounts payable		13,680
Owners’ capital		23,007
Totals	$36,975	$36,975