Q29E

Question

Ashley Stamper opened a medical practice. During July, the first month of operation, the business, titled Ashley Stamper, MD, experienced the following events: Jul. 6 Received a contribution of $68,000 from Stamper and opened a bank account in the name of A. Stamper, MD. The corporation issued common stock to Stamper. 9 Paid $56,000 cash for land. 12 Purchased medical supplies for $1,500 on account. 15 Officially opened for business. 20 Paid cash expenses: employees’ salaries, $1,300; office rent, $1,500; utilities, $100. 31 Earned service revenue for the month, $13,000, receiving cash. 31 Paid $1,050 on account. Analyze the effects of these events on the accounting equation of the medical practice of Ashley Stamper, MD, using the following format:

+ – ASSETS EQUITY Rent Expense – Utilities Expense Common – Stock Contributed Capital + + Dividends Retained Earnings – Salaries Expense Service Revenue + Medical Supplies C

Step-by-Step Solution

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Answer

Effect of the transaction on the accounting equation is shown as follows:

	Assets	=	Liabilities	+	Equity
Contributed Capital	+	Retained Earnings
Cash	+	Medical Supplies	+	Land	Accounts Payable	Common Stock	-	Dividends	+	Service Revenue	-	Salaries Expense	-	Rent Expense	-	Utilities Exp[ense
July 6	+68,000					=		+	+68,000
Bal.	$68,000					=		+	$68,000
July 9	-56,000				+56,000	=		+
Bal.	$12,000			+	$56,000	=		+	$6 8,000
July 12			+1,500			=	+1,500	+
Bal.	$12,000	+	$1,500	+	$56,000	=	$1,500	+	$68,000
July 15	-		-		-	=	-	+	-		-		-		-		-		-
Bal.	$12,000	+	$1,500	+	$56,000	=	$1,500	+	$68,000
July 20	-2,900					=		+							-1,300		-1,500		-100
Bal.	$9,100	+	$1,500	+	$56,000	=	$1,500	+	$68,000					-	$1,300	-	$1,500	-	$100
July 31	+13,000					=		+					+1,3000
July 31	-1,050					=	-1,050	+
Bal.	$21,050	+	$1,500	+	$56,000	=	$450	+	$68,000	-	-	+	$13,000	-	$1,300	-	$1,500	-	$1,00
	$78,550		$78,550