Due Date: May 18th (Covers Chapter 1-4 Content)

Question 1:

Sam & Suzie MacNeil began operations for their eye clinic, called MacNeils Eye Clinic on January 2019. The annual reporting periods ends December 31. A trial balance was created with amounts listed below. The trial balance on January 1, 2020 was as follows:

Account Titles

Debit

Credit

Cash

$7,000

Accounts Receivable

3,000

Supplies

3,000

Equipment

6,000

Accumulated Depreciation (on Equipment)

$1,000

Other Assets

6,000

Accounts Payable

5,000

Notes Payable

0

Wages Payable

0

Interest Payable

0

Income Tax Payable

0

Deferred Revenue

0

Contributed Capital

15,000

Retained Earnings

4,000

Dividends Declared

0

Service Revenue

0

Depreciation Expense

0

Income Tax Expense

0

Interest Expense

0

Operating Expenses

0

Totals

$25,000

$25,000

Transactions during 2020 are as follows:

a. Borrowed $22,000 cash on July 1, 2020, signing a six-month note payable.

b. Purchased equipment for $25,000 cash on July 1,2020

c. Issued additional shares for $5,000

d. Earned revenues for 2020, $55,000, including $8,000 on credit and $47,000 received in cash.

e. Recognized operating expenses for 2020, $30,000, including $5,000 on credit and $25,000 in cash.

f. Purchased other assets, $3,000 cash

g. Collected accounts receivable $9,000

h. Paid accounts payable $10,000

i. Purchased supplies on account for future use $7,000

j. Received a $3,000 deposit from a hospital for a contract to start January 5, 2021

k. Declared and paid a cash dividend $4,000

Data for adjusting journal entries are as follows:

l. Supplies of $3,000 were counted on December 31, 2020

m. Depreciation for 2020, $4,000

n. Accrued interest on notes payable $1,000

o. Wages incurred since the December 27 payroll not yet paid, $3,000

p. Income tax for 2020 was $4,000 and will be paid in 2021

Required:

1. Setup T-accounts for the accounts on the trial balance and enter beginning balances.

2. Record journal entries for transactions (a) through (k) and post them to the T-accounts.

3. Prepare and unadjusted trial balance.

4. Record and post the adjusting journal entries (l) through (p).

5. Prepare an adjusted trial balance

6. Prepare an income statement, statement of retained earnings and balance sheet.

7. How much net income did MacNeils Eye Clinic generate during 2020? Is the company financed primarily by liabilities or shareholders equity?