Question

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Question 10 0.9 pts As Sparky's Family Practice, M.D., maintains the accounting records of the clinic on a cash basis. During 20x1, Dr. Sparky collected $142,600 from the patients and paid $55,470 in expenses. At January 1, 20x1 and December 31, 20x1, the clinic had the following assets and liabilities. Accounts Receivable Unearned Revenue Accrued Expenses Prepaid Expenses Equipment January 1, 20x1 $9,200 2,800 3,400 1,900 40,000 December 31, 20x1 $15,900 4,100 2,300 3,400 40,000 *For accrual accounting purposes, Sparky uses a straight-line method of depreciation and estimates a 16-year useful life with no salvage value. The equipment was in use for the full year. Based on past experience, Sparky also estimates that 2% of Accounts Receivable will prove to be uncollectible. The balance before adjustment in the Allowance for Doubtful Accounts is a debit balance of $100. Using the above information, answer the next (2) questions: a. Service Revenues (on an accrual basis) $_ Note: do not use $ signs or commas when recording your answer.

Answer 1

Question 10

To calculate the service revenue on accrual basis, we need to use the below logic.

Service revenue (on accrual basis) = Cash collected from patients + Closing accounts receivable - Opening accounts receivable - Closing unearned revenue + Opening unearned revenue

Service revenue (on accrual basis) = 142600 + 15900 - 9200 + 2800 - 4100 = 148000

Question 11

Before considering the depreciation expenses and Bad debts expenses, we need to calculate the expenses accrued during the year 20X1.

Expenses on accrual basis = Expenses paid - Opening accrued expenses + closing accrued expenses + Opening prepaid expenses - Closing prepaid expenses

Expenses on accrual basis = 55470 - 3400 + 2300 + 1900 - 3400 = $52,870

Depreciation expenses on straight line basis = (Cost - Salvage value)/Useful life of the asset

Depreciation expenses = 40000/16 =2500

Allowance for doubtful debts on December 31, 20X1 = 2% of Accounts receivable = 2%×15,900 = 318

There is debit balance of $100 in allowance for doubtful debts account and we need the closing provision of $318. So, the bad debts expenses will be $418

Total operating expenses on accrual basis = Expense on accrual basis + depreciation expenses + bad debts expenses

Total operating expenses on accrual basis = 52870 + 2500 +418 = 55788