Question

In: Accounting

At the beginning of 2017, Dr. John opened his medical practice as a personal service corporation....

At the beginning of 2017, Dr. John opened his medical practice as a personal service corporation. The entity uses a December 31 year-end and the accrual method of accounting. During the year, the corporation billed patients and insurance companies for $485,000 for medical services. At the end of the year, $60,000 of this amount had not been collected. The entity earned $1,500 interest on a money market account held in the local bank and another $1,500 interest on an investment in bonds.

Dr. John’s salary from his corporation is $12,000 per month. However, he did not cash his November and December payroll check until January 2018. To help provide funds to invest in the new business, Dr. John’s parents loaned him $150,000 and did not charge him any interest. He also owns stock that has increased in value from $7,000 at the beginning of the year to more than $30,000 at the end of the year.

Dr. John would like your help in calculating the correct amounts of his own gross income and the gross income of the corporation.

Please show all work.

Solutions

Expert Solution

Calculation of gross income of the corporation

Amount billed for medical services                        $485,000

Interest on money market                                         $1,500

Interest on investment                                              $1,500

                                                                            ----------------

Total Gross income                                             $488,000                     

                                                                          -----------------

Note: Since accrual method of accounting is followed $ 60,000 will be considered to be income of the year 2017 even though it had not been collected

Calculation of gross income of Dr. John

Salary Income(12000*12)                                   $ 144,000

                                                                           --------------

Note: Increase in value of stock will not be considered until the same has actually been realised.i.e notional gains will be ignored


Related Solutions

At the beginning of 2019, Dr. John opened his medical practice as a personal service corporation....
At the beginning of 2019, Dr. John opened his medical practice as a personal service corporation. The entity uses a December 31 year-end and the accrual method of accounting. During the year, the corporation billed patients and insurance companies for $485,000 for medical services. At the end of the year, $60,000 of this amount had not been collected. The entity earned $1,500 interest on a money market account held in the local bank and another $1,500 interest on an investment...
Dr. Laura Smith opened a medical practice specializing in physical therapy. During the first month of...
Dr. Laura Smith opened a medical practice specializing in physical therapy. During the first month of operation ​(July​), the​ business, titled Dr. Laura Smith​, Professional Corporation​ (P.C.), experienced the following​ events: LOADING... ​(Click the icon to view the​ events.) Read the requirements LOADING... . Requirement 1. Analyze the effects of these events on the accounting equation of the medical practice of Dr. Laura Smith​, P.C.Begin with the first transaction on July 6. ​(Use parentheses or a minus sign when decreasing...
Dr Jones is evaluating an offer for his medical practice that will allow him to retire...
Dr Jones is evaluating an offer for his medical practice that will allow him to retire five years early. He has received an offer of R650 000 for his practice and he can invest this amount in an account earning 15% per year, compounded annually. If the practice is expected to generate the following cash flows, advise Dr Jones as to whether he should accept this offer and retire now or not.   End of year Amount (in rands) 1 160...
Dr Jones is evaluating an offer for his medical practice that will allow him to retire...
Dr Jones is evaluating an offer for his medical practice that will allow him to retire five years early. He has received an offer of R650 000 for his practice and he can invest this amount in an account earning 15% per year, compounded annually. If the practice is expected to generate the following cash flows, advise Dr Jones as to whether he should accept this offer and retire now or not.   End of year Amount (in rands) 1 160...
Dr. Chris EvensenChris Evensen opened a medical practice specializing in physical therapy. During the first month...
Dr. Chris EvensenChris Evensen opened a medical practice specializing in physical therapy. During the first month of operation ​(DecemberDecember​), the​ business, titled Dr. Chris EvensenChris Evensen​, Professional Corporation​(P.C.), experienced the following​ events: LOADING... ​(Click the icon to view the​ events.) Read the requirements LOADING... . Requirement 1. Analyze the effects of these events on the accounting equation of the medical practice of Dr. Chris EvensenChris Evensen​, P.C.Begin with the first transaction on DecemberDecember 6. ​(Use parentheses or a minus sign...
Dr. Steve Rosenthal has his own medical practice. He specializes in the treatment of diabetics. His...
Dr. Steve Rosenthal has his own medical practice. He specializes in the treatment of diabetics. His staff consists of a receptionist, two nurses, a lab technician, and a dietitian. As patients enter the outer office, they check in with the receptionist. The patient then waits until called by a nurse. When called, the patient moves from the waiting room to the inner offices. The patient must weigh in and is then assigned a room. The nurse assigning the patient to...
Dr. Smith and his wife are both medical doctors and they just completed their medical residence...
Dr. Smith and his wife are both medical doctors and they just completed their medical residence at a local hospital. While attending your graduation party, Dr. Smith and his wife learned that you just earned your MBA. The Smiths approached you for advice on the legal form of business they should elect for their medical practice they are planning to open. The Smiths are interested in understanding each form of business organization and advantages and disadvantages of each form. In...
Create a trial balance with the following information: DR. a. Mr. Reed opened a print service...
Create a trial balance with the following information: DR. a. Mr. Reed opened a print service company, Print It, on Jan 1 and gave the company $15000 in cash and a piece of land valued at $65000 in exchange for common stock. b. On Jan 1 Print It paid $7500 for the first 6 months of rent. c. Print It paid cash for $1000 of office supplies on Jan 15 d. Print It signed a 10,000 notes payable on Feb...
what is closely held corporation, a personal holding company, and a personal service corporation? what are...
what is closely held corporation, a personal holding company, and a personal service corporation? what are S Corporations?   advantages and disadvantages of S Corporations. example of a type of business suitable. May corporations be formed as S Corporations or no? Please explain and include information on S Corporation Election. thank you
Jack Stewart is an employee of Dr. Sloan’s medical practice, where he earns a salary of...
Jack Stewart is an employee of Dr. Sloan’s medical practice, where he earns a salary of $100,000 in 2019. He also runs his own business on the side and earns $50,000 of net self-employment income in 2019. How much Self-Employment (SE) tax does Jack owe for 2019 related to his $50,000 self-employment income? Considering the SE tax you calculated for Jack Stewart in the previous question, and also that Jack, who files single, paid $4,000 in student loan interest and...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT