FINANCIAL ACCOUNTING - Eighth Edition

E2-16A (10-20 min.) Learning Objective 1: Analyzing transactions; using the accounting equation

Solutions Manual

Harry Samson opened a medical practice specializing in surgery. During the first month of operation (March), the business, titled Harry Samson, Professional Corporation (P.C.), experienced the following events: Mar. 6 9 12 15 1531 1531 31 31 31 1. 2. Samson invested $42,000 in the business, which in turn issued its common stock to him. The business paid cash for land costing $25,000. Samson plans to build an office building on the land. The business purchased medical supplies for $16,000 on account. Harry Samson, P.C., officially opened for business. During the rest of the month, Samson treated patients and earned service revenue of $7,700, receiving cash for half the revenue earned. The business paid cash expenses: employee salaries, $900; office rent, $900; utilities, $200. The business sold supplies to another physician for cost of $200. The business borrowed $18,000, signing a note payable to the bank. The business paid $1,100 on account.

Analyze the effects of these events on the accounting equation of the medical practice of Harry Samson, P.C. After completing the analysis, answer these questions about the business. a. b. c. d. e. How much are total assets? How much does the business expect to collect from patients? How much does the business owe in total? How much of the businesss assets does Samson really own? How much net income or net loss did the business experience during its first month of operations?

Chapter 2: Transaction Analysis

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FINANCIAL ACCOUNTING - Eighth Edition

Solutions Manual

Solution: Req. 1 ASSETS Accounts Medical + + + Receivable Supplies Analysis of Transactions = LIABILITIES Land STOCKHOLDERS EQUITY Accounts Note Common Retained Type of Stockholders = + + + Equity Transaction Payable Payable Stock Earnings +

Cash

Req. 2 a. b. c. d. e.

Chapter 2: Transaction Analysis

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