Question

CAPSTONE Journal Entries

The following information applies to the questions displayed below.]

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):

Account Titles	Debit			Credit
Cash	$	6
Accounts Receivable		2
Supplies		2
Equipment		9
Accumulated Depreciation				$	2
Software		7
Accumulated Amortization					2
Accounts Payable					4
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Taxes Payable					0
Deferred Revenue					0
Common Stock					16
Retained Earnings					2
Service Revenue					0
Depreciation Expense		0
Amortization Expense		0
Salaries and Wages Expense		0
Supplies Expense		0
Interest Expense		0
Income Tax Expense		0
Totals	$	26		$	26

Transactions during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $23 cash on July 1, 2018, signing a six-month note payable.
2. Purchased equipment for $26 cash on July 2, 2018.
3. Issued additional shares of common stock for $6 on July 3.
4. Purchased software on July 4, $2 cash.
5. Purchased supplies on July 5 on account for future use, $8.
6. Recorded revenues on December 6 of $57, including $9 on credit and $48 received in cash.
7. Recognized salaries and wages expense on December 7 of $31; paid in cash.
8. Collected accounts receivable on December 8, $8.
9. Paid accounts payable on December 9, $9.
10. Received a $2 cash deposit on December 10 from a hospital for a contract to start January 5, 2019.

Data for adjusting journal entries on December 31:

11. Amortization for 2018, $2.
12. Supplies of $2 were counted on December 31, 2018.
13. Depreciation for 2018, $3.
14. Accrued interest of $1 on notes payable.
15. Salaries and wages incurred but not yet paid or recorded, $4.
16. Income tax expense for 2018 was $3 and will be paid in 2019.

Required:

Required:

2. Record journal entries for transactions (a) through (j). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.)

• Record the borrowing $23 cash on July 1, 2018, signing a six-month note payable.

• Record the purchase of equipment for $26 cash on July 1, 2018.

• Record the issuance of additional shares of common stock for $6.

7. Prepare the closing journal entry. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.)

8. Post the closing entry from requirement 7 and prepare a post-closing trial balance. (Enter your answers in thousands of dollars.)

9-a. How much net income did the physical therapy clinic generate during 2018? What was its net profit margin?

9-b. Is the business financed primarily by liabilities or stockholders’ equity?

9-c. What is its current ratio?

Answer 1

Journal Entries Date Account Title and Explaination Debit Credit Post. Ref. a 23.00 Cash Notes Payable (To record cash borrowed by signing note) 23.00 b 26.00 Equipment Cash (To record equipment purchased for cash) 26.00 6.00 Cash Common Stock (To record common stock shares issued) $ 0.00 2.00 Software Cash (To record Software purchased for cash) 2.00

8.00 Supplies Accounts Payable (To record supplies purchased on account) $ 8.00 9.00 48.00 Accounts Receivable Cash Service Revenue (To record Service provided on account and for cash) 57.00 31.00 Salaries and Wages Expenses Cash (To record payment of salaries and wages) 31.00 h 8.00 Cash Accounts Receivable (To record collection of receivables) $ 8.00 9.00 Accounts Payable Cash (To record payment of payables) 9.00 2.00 Cash Unearned Service Revenue (To record advance received for future service) 2.00

k 2.00 Adjusting Entries Amortization Expense Accumulated Amortization (To record amortization expenses) $ 2.00 8.00 Supplies Expense ($2+$8-$2) Supplies (To record Supplies Expense) $ 8.00 m 3.00 Depreciation Expense Accumulated Depreciation |(To record Depreciation Expense) 3.00 1.00 Interest Expense Interest Payable (To record accrued interest expense)) 1.00 o 4.00 Salaries and Wages Expense Salaries and Wages Payable |(To record accrued salaries and wages expense) S 4.00 3.00 Income Tax Expense Income Tax Payable (To record income tax expense accrued) Is 3.00 |