Question

E3.8 (LO 2, 3) Lorena Manzone, D.D.S., opened a dental practice on January 1, 2020. During the first month of operations, the following transactions occurred.

1. Performed services for patients who had dental plan insurance. At January 31, $785 of such services were performed but not yet recorded.

2. Utility expenses incurred but not paid prior to January 31 totaled $650.

3. Purchased dental equipment on January 1 for $80,000, paying $30,000 in cash and signing a $50,000, 3-year note payable. The equipment depreciates $400 per month. Interest is $500 per month.

4. Purchased a one-year malpractice insurance policy on January 1 for $24,000.

5. Purchased $1,600 of dental supplies. On January 31, determined that $400 of supplies were on hand.

Instructions

Prepare the adjusting entries on January 31. Account titles are Accumulated Depreciation—Equipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expense, and Utilities Payable.

Answer 1

Adjusting entry :

No	Account and explanation	debit	credit
1	Account receivable	785
	Service revenue		785
	(To record service revenue)
2	Utilities expense	650
	Utilities payable		650
	(To record accured utilities)
3	Depreciation expense	400
	Accumlated depreciation-equipment		400
	(To record depreciation expense)
	Interest expense	500
	Interest payable		500
	(To record accured interest)
4	Insurance expense (24000/12)	2000
	Prepaid insurance		2000
	(To record insurance expense)
5	Supplies expense (1600-400)	1200
	Supplies		1200
	(To record supplies adjusted)