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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:

Account Titles	Debit			Credit
Cash	$	7
Accounts Receivable		3
Supplies		3
Equipment		10
Accumulated Depreciation				$	2
Software		6
Accumulated Amortization					2
Accounts Payable					5
Notes Payable (short-term)					0
Salaries and Wages Payable					0
Interest Payable					0
Income Taxes Payable					0
Deferred Revenue					0
Common Stock					15
Retained Earnings					5
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	$	29		$	29

Transactions during 2018 follow:

1. Borrowed $28 cash on July 1, 2018, signing a six-month note payable.
2. Purchased equipment for $31 cash on July 2, 2018.
3. Issued additional shares of common stock for $5 on July 3.
4. Purchased software on July 4, $3 cash.
5. Purchased supplies on July 5 on account for future use, $7.
6. Recorded revenues on December 6 of $61, including $8 on credit and $53 received in cash.
7. Recognized salaries and wages expense on December 7 of $36; paid in cash.
8. Collected accounts receivable on December 8, $9.
9. Paid accounts payable on December 9, $10.
10. Received a $3 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 $3 were counted on December 31, 2018.
13. Depreciation for 2018, $4.
14. Accrued interest of $1 on notes payable.
15. Salaries and wages incurred but not yet paid or recorded, $3.
16. Income tax expense for 2018 was $4 and will be paid in 2019.

Answer 1

Adjusting Journal Entries:

1)Amortisation---------- Dr 2

To Accumulated amortisation 2

(Being Amortisation credited tp acc.amor)

1)Amortisation: It means Intangible assets value has been decreased due to amortisation like depreciation for tangible assets. So, Amortisation has to be charged to Intangible asset i.e., software. Software is an asset i.e, debit. In order to reduce the asset we have to credit the asset by debiting the amortisation but already accumulated amor account is being maintained, So credited to the acc. amortisation account.

2)Closing stock a/c-------Dr 3

To trading a/c 3

(Bringing the closing stock into books)

(Closing stock will be taken to Trading account for closing )

3) Depreciation a/c --------Dr 4

To Accumulated depreciation 4

(Being depreciation credited to acc. dep)

( Depreciation is the reduction in the value of the tangible asset, So assets value must be decreased. Means

Depreciation ---Dr  

To Tangible Asset( Equipment)

But they are maintaining accumulated depreciation , so credited to acc dep instead of asset account)

4) Interest on notes payable-----Dr 1

To Accrued Interest 1

( Being Accrued interest to be paid has been charged)

( They have to pay interest on notes payable but not paid till year end. So interest as an expense has been debited as per accrual system and accrued interest is a liability which we have to pay next year. So shown as Accrued Interest or outstanding interest)

5) Salaries and wages------------Dr 3

To outstanding Salaries 3

(Being Salaries not yet paid or recorded)

(Salaries and wages are expenses . So debited . But they are not paid . So Created a liability so that we will pay next year)

6)Income tax expense -----------Dr 4

To Provision for tax 4

(Being provision created for tax expense)

(Income tax has to be paid for the current year and it is an expense. but we hadnot paid till. So created a provision as Provison for tax. In this case, we had created a provision because as we are uncertain about the tax amount. If we are sure like in the above 2 cases, we can create on accrued expense)