Question

C4-3 Recording Transactions (Including Adjusting Journal Entries), Preparing Financial Statements and Closing Journal Entries, and Computing Net Profit Margin and Current Ratio (Chapters 2, 3, and 4) (LO 2-3, LO 3-3, LO 4-1, LO 4-2, LO 4-3, LO 4-4, L Drs. Glenn Feltham and David Ambrose began operations of their physical therapy clinic, called Northland Physical Therapy, on January 1, 2017. The annual reporting period ends December 31. The trial balance on January 1, 2018, was as follows (the amounts are rounded to thousands of dollars to simplify): Debit Credit $ 7 mmo in Account Titles Cash Accounts Receivable Supplies Equipment Accumulated Depreciation Software Accumulated Amortization Accounts Payable Notes Payable (short-term) Salaries and Wages Payable Interest Payable Income Taxes Payable Deferred Revenue Common Stock Retained Earnings Service Revenue Depreciation Expense Amortization Expense Salaries and Wages Expense Supplies Expense Interest Expense Income Tax Expense Totals $27 $27

Answer 1

Northland Physical Therapy Journal entries Calculation Debit Credit No. Acccount Cash 17 а a Notes Payable (short-term) 17 b Equipment 20 Cash 20 c Cash 5 Common stock 5 d Software 3 Cash 3 e Supplies Accounts Payable 7 7 f Cash Accounts Receivable Service revenue 50 gSalaries & Wages expense 25 Cash 25 hCash 9 Accounts Receivable 9 Accounts Payable 10 Cash 10 jCash 3 Deferred revenue Adjusting JEs k Amortisation expense 1 Accumulated Amortisation 1 Supplies expense 7 =3+7-3 Supplies 7 m Depreciation expense 4 Accumulated Depreciation 4. Interest expense 1 n Interest Payable 1 Salaries & Wages expense 4 Salaries & Wages Payable 4 p Income tax expense 4. Income Tax Payable 4 Closing JEs CE1 Service revenue 50 Depreciation expense 4. Amortisation expense 1 Salaries & Wages expense Supplies expense 29 7 Interest expense 1 Income tax expense Retained Earnings

Northland Physical Therapy T Accounts Date Debit Credit Date Debit Date Credit Debit Date Credit Date Debit Credit Date Date Date Cash Supplies $ Accounts Receivable Op bal $ $ $ Op bal Op bal 7 3 17 b $ $ $ $ f 8 h 20 9 7 a е $ $ $ d 5 7 C $ f 42 25 g. $ $ h i 10 $ 3 $ $ $ Bal. Bal. Bal. 25 2. 3 Accum. Depr. Equipment Software Equipment Accum. Amortisation Software Op bal $ $ $ 1 Op bal $ $ $ Op bal Op bal 5 1 $ $ 4. d k 20 3 1 Bal. Bal. $ $ $ $ Bal. Bal. 29 5 8 2. Accounts Payable Salaries & Wages Payable Interest Payable Notes Payable (short-term) 10 Op bal Op bal $ Op bal Op bal $ $ $ $ i 5 $ $ 7 17 4 1 е a Bal. Bal. Bal. Bal. $ $ $ $ 2 17 1. Income Tax Payable Deferred revenue Retained Earnings Common Stock Op bal $ Op bal $ Op bal $ $ $ Op bal 15 5 $ CE1 4 3 5 4 р C Bal. Bal. $ $ $ $ Bal Bal. 4 3 20 9 Amortisation expenses Service revenue Depreciation expense $ Salaries & Wages expense $ $ $ f k 50 4 1 25 m g 4 CE1 $ $ $ $ $ СЕ1 50 СЕ1 4 CE1 1 29 Bal $ $ $ Bal. Bal. Bal. Supplies expense 7 CE1 Interest expense Income tax expense $ $ $ $ 7 1 СЕ1 1 СЕ1 4 n p $ $ $ Bal. Bal. Bal. - -

Post Closing TB Northland Physical Therapy Unadjusted TB Adjusted TB Debit Credit Debit Credit Debit Credit Account Cash 25 25 Accounts Receivable 2. 2 2 Supplies 10 3 Equipment 29 29 29 Accumulated Depreciation 1 5 5 Software 8 Accumulated Amortisation 1 2 2 Accounts Payable 2 2 2 Notes Payable (short-term) 17 17 17 Salaries & Wages Payable Interest Payable Income Tax Payable 4 1 1 Deferred revenue 3 3 3 Common stock 20 20 20 Retained Earnings 5 5 Service revenue 50 50 Depreciation expense Amortisation expense 1 Salaries & Wages expense 29 Supplies expense 7 Interest 1 expense Income tax expense Totals 99 99 113 113 67 67 st 25 25

Northland Physical Therapy Income Statement For the Year Ended December 31, 2018 |(in thousands) Service revenue Expenses Salaries & Wages expense 29 Supplies expense 7 Depreciation expense 4 Amortisation expenses 1 Interest expense 1 Income tax expense 4. Total Expenses 46 Net income 4. Statement of Retained Earnings For the Year Ended December 31, 2018 |(in thousands) Balance, Jan 1, 2018 5 Net Profit 4 Dividends Balance, Dec 31, 2018 Net profit margin Net income/Revenue *100 4/50*100 Net profit margin 8.00%

Northland Physical Therapy Balance Sheet As of December 31, 2018 |(in thousands) Liabilities Assets Current Liabilities 25 Accounts Payable 2 Notes Payable (short-term) 3 Salaries & Wages Payable 30 Interest Payable Income Tax Payable Current Assets Cash 2. Accounts Receivable 17 Supplies Total Current Assets Property, Plant & Equipment Deferred revenue Total Current Liabilities Equipment 29 31 Accumulated Depreciation (5) 24 Stockholders Equity Common Stock Retained earnings Equipment, Net Software 20 Accumulated Amortisation (2) 6 Total Stockholders Equity Software, Net 29 Total Property, Plant & Equipment 30 60 Total Liabilities & Stockholders Equity Total Assets 60 Current Assets/Current Liabilties Current Ratio -30/31 Current Ratio 0.97 st st coN

9-a	Net income	4
	Net profit margin	8.00%
9-b	Liabilities
	Out of total assets of $60, $31 is financed by liabilities as shown in Balance Sheet
9-c	Current Ratio	0.97