Caren Smith opened a medical practice. During July, the first month of operation, the business, titled Caren Smith, M.D., experienced the following events:

Question

Jul 6

Smith invested $55,000 in the business by opening a bank account in the name of C. Smith, M.D. The business gave capital to Smith.
9

12

Purchased medical supplies for $1,800 on account.
15

Officially opened for business.
15–31

During the rest of the month, Smith treated patients and earned service revenue of $8,000, receiving cash.
29

Paid cash expenses: employees’ salaries, $1,600; office rent, $900; utilities, $100.
30

Returned supplies purchased on the 12th for the cost of those supplies, $700.
31

Paid $1,100 on account.
Requirement
1. Analyze the effects of these events on the accounting equation of the medical practice of Caren Smith, M.D. Use a format similar to that of Exhibit 1-6, with headings for Cash; Medical supplies; Land; Accounts payable; and Smith, capital.

Answer 1

Cash: +55,000; +8,000; -1,600; -900; -100; +700; -1,100
Medical Supplies: +1,800; -700
Land: 0
Accounts Payable: +1,800; -1,100
Smith, Capital: +55,000