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ACCT 250 Chapter 4

Jim Haught, D.D.S., opened an incorporated dental practice on Jan. 1, 2016.  They’re closing the books for January and need to make adjustments at Jan. 31, 2016.

1.  Performed services for patients who had dental plan insurance.  At Jan. 31, $760 of such services was completed but not yet billed to the insurance companies.

2. Utilities expenses incurred but not paid prior to Jan. 31 totaled $450.

3. Purchased a 1-year malpractice insurance policy on Jan. 1 for $24,000.

4. Purchased $1,750 of dental supplies (recorded as increase to Supplies).  On Jan. 31, determined that $550 of supplies were on hand.

What are the Jan. 31, 2016 adjustments needed to update Jim’s account balances?

1) Performed services for patients who had dental plan insurance.  At Jan. 31, $760 of such services was completed but not yet billed to the insurance companies.

Assets   =

Liabilities    +

Equity

 

 

 

 

 

 

 

If this adjustment is not made, the following are overstated, understated, or not impacted:  (completed for you on this question)

Assets:   understated Revenue:   understated    

Liabilities:   not impacted Expense:   not impacted   

Stockholders’ Equity:   understated  

2)  Utilities expenses incurred but not paid prior to Jan. 31 totaled $450.

Assets   =

Liabilities    +

Equity

 

 

 

 

 

 

If this adjustment is not made, the following are overstated, understated, or not impacted:  

Assets: ____________ Revenue: ____________    

Liabilities: __________ Expense: ____________

Stockholders’ Equity: __________ 

3)  Purchased a 1-year malpractice insurance policy on Jan. 1 for $24,000.

Assets   =

Liabilities    +

Equity

 

 

 

 

 

 

If this adjustment is not made, the following are overstated, understated, or not impacted:  

Assets: ____________ Revenue: ____________    

Liabilities: __________ Expense: ____________

Stockholders’ Equity: __________ 

4)  Purchased $1,750 of dental supplies (recorded as increase to Supplies).  On Jan. 31, determined that $550 of supplies were on hand.

Assets   =

Liabilities    +

Equity

 

 

 

 

 

 

If this adjustment is not made, the following are overstated, understated, or not impacted:  

Assets: ____________ Revenue: ____________    

Liabilities: __________ Expense: ____________

Stockholders’ Equity: __________

For each transaction, determine if accrual or deferral and write transaction on accounting equation.   

1.  Cash received before performing service – accrual or deferral?

Original Transaction --

Assets =

Liabilities   +

Equity

 

 

 

 

 

 

Adjustment – Service obligation performed at a later date (record revenue).

Assets =

Liabilities   +

Equity

 

 

 

 

 

 

2.  Cash paid before incurring expense – accrual or deferral?

Original Transaction --

Assets =

Liabilities   +

Equity

 

 

 

 

 

 

Adjustment – Incur the expense/get the benefit over time (record expense).

Assets =

Liabilities   +

Equity

 

 

 

 

 

 

3.  Performed service but wasn’t paid – accrual or deferral?

Adjustment – (record revenue)

Assets =

Liabilities   +

Equity

 

 

 

 

 

 

4.  Incurred expense but didn’t pay for it – accrual or deferral?

Adjustment – (record expense)

Assets =

Liabilities   +

Equity