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Question about Northland Physical Therapy

Requirement 3: Total Debits & Credits = $116
Requirement 6: Net income = $6
Requirement 8: Total Debits & Credits = $75
PA4-5 Comprehensive Review Problem: From Recording Transactions (including
Adjusting Journal Entries) to Preparing Financial Statements and Closing Journal
Entries (Chapters 2, 3, and 4)
Drs. Glenn Feltham and Gary Entwistle began operations of their physical therapy clinic called
Northland Physical Therapy on January 1, 2005. The annual reporting period ends December 31.
The trial balance on January 1, 2006, was as follows (the amounts are rounded to thousands of dollars to simplify):

** Refer to ATTACHED JPG file to review the balance, debits and credits **

Transactions during 2006 (summarized in thousands of dollars) follow:
a. Borrowed $22 cash on July 1, 2006, signing a short-term note payable.
b. Purchased equipment for $20 cash on July 1, 2006.
c. Issued additional shares of stock for $5.
d. Earned revenues for 2006, $55, including $8 on credit and $47 received in cash.
e. Recognized operating expenses for 2006, $30, including $5 on credit and $25 in cash.
f. Purchased other assets, $3 cash.
g. Collected accounts receivable, $9.
h. Paid accounts payable, $7.
i. Purchased on account supplies for future use, $8.
j. Received a $3 deposit from a hospital for a contract to start January 5, 2007.
k. Declared a dividend, $4.
l. Paid the $4 dividend in cash.
Data for adjusting journal entries:
m. Supplies of $4 were counted on December 31, 2006.
n. Depreciation for 2006, $5.
o. Accrued interest on notes payable of $1.
p. Wages earned since the December 27 payroll not yet paid, $2.
q. Income tax for 2006 was $4, and will be paid in 2007.

Required:
1. Set up T-accounts for the accounts on the trial balance and enter beginning balances.
2. Record journal entries for transactions a through l and post them to the T-accounts.
3. Prepare an unadjusted trial balance.
4. Record and post the adjusting journal entries m through q.
5. Prepare an adjusted trial balance.
6. Prepare an income statement, statement of retained earnings, and balance sheet.
7. Prepare and post the closing journal entries.
8. Prepare a post-closing trial balance.
9. How much net income did the physical therapy clinic generate during 2006? Is the business financed primarily by debt or equity?

Solution Preview

** Please see the ATTACHED Excel file for complete solution, including formulas and calculations **

1. Set up T-accounts for the accounts on the trial balance and enter beginning balances
2. Record journal entries for transactions a ...

Solution Summary

The posting has solution to comprehensive problem PA4-5 relating to Northland Physical Therapy

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