Question

1. Dr. Knights, DVM, opened a veterinary clinic on May 1, current year. The business transactions for May are shown as follows.

   May 1	Dr. Knights invested $480,000 cash in the business in exchange for 6,000 shares of capital stock.
   May 4	Land and a building were purchased for $300,000. Of this amount, $84,000 applied to the land, and $216,000 to the building. A cash payment of $120,000 was made at the time of the purchase, and a note payable was issued for the remaining balance.
   May 9	Medical instruments were purchased for $156,000 cash.
   May 16	Office fixtures and equipment were purchased for $60,000. Dr. Knights paid $24,000 at the time of purchase and agreed to pay the entire remaining balance in 15 days.
   May 21	Office supplies expected to last several months were purchased for $6,000 cash.
   May 24	Dr. Knights billed clients $2,640 for services rendered. Of this amount, $2,280 was received in cash, and $360 was billed on account (due in 30 days).
   May 27	A $480 invoice was received for several radio advertisements aired in May. The entire amount is due on June 5.
   May 28	Received a $120 payment on the $360 account receivable recorded May 24.
   May 31	Paid employees $3,360 for salaries earned in May.

   A partial list of account titles used by Dr. Knights includes the following.

   Cash	Notes Payable
   Accounts Receivable	Accounts Payable
   Office Supplies	Capital Stock
   Medical Instruments	Veterinary Service Revenue
   Office Fixtures and Equipment	Advertising Expense
   Land	Salary Expense
   Building

   Using the information above, what is the amount of Total Assets?

   		$635,280
   		$689,280
   		$695,040
   		$695,280

2. Using the information above, what is the amount of Total Liabilities?

   		$216,480
   		$216,720
   		$180,000
   		$36,480

3. Using the information above, what is the amount of Total Owner's Equity?

   		$515,280
   		$478,800
   		$164,800
   		$298,800

4. Using the information above, what is the amount of Profits OR Losses?

   		($1,200)
   		$1,200
   		($720)
   		$695,280

Answer 1

Date	Title	Debit	Credit
May-01	Cash	$ 480,000
	Capital stock		$ 480,000
May-04	Land	$    84,000
	Building	$ 216,000
	Cash		$ 120,000
	Note payable		$ 180,000
May-09	Medical instruments	$ 156,000
	Cash		$ 156,000
May-16	Office fixtures and equipment	$    60,000
	Cash		$    24,000
	Accounts payable		$    36,000
May-21	Office supplies	$      6,000
	Cash		$      6,000
May-24	Cash	$      2,280
	Accounts receivable	$          360
	Veterinary Service Revenue		$      2,640
May-27	Advertising expense	$          480
	Accounts payable		$          480
May-28	Cash	$          120
	Accounts receivable		$          120
May-31	Salary expenses	$      3,360
	Cash		$      3,360

1.

Cash ($480,000-$120,000-$156,000-$24,000-$6,000+$2,280+$120-$3,360)	$ 173,040
Land	$    84,000
Building	$ 216,000
Medical instruments	$ 156,000
Office fixtures and equipment	$    60,000
Office supplies	$      6,000
Accounts receivable	$          240
Total assets	$ 695,280

Answer is D.

2.

Note payable	$ 180,000
Accounts payable ($480+$36,000)	$    36,480
Total liabilities	$ 216,480

Answer is A.

3.

Capital stock	$ 480,000
Net income ($2,640-$480-$3,360)	$    (1,200)
Total owners equity	$ 478,800

Answer is B.

4.

Net loss ($2,640-$480-$3,360)

$    (1,200)

Answer is A

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