Dr. Cravati,

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ACCT201/EXERCISE QUESTION 4/CH.3

Question
DMD., opened a dental clinic on August 1, 2007. The business transactions for August are shown below:

|Aug 1 |Dr. Cravati invested $280,000 cash in the business in exchange for 1,000 shares of capital stock. | |Aug 1 |Rented an office and paid 3-month rent in advance, $2,000 | |Aug 4 |Land and building were purchased for $400,000. Of this amount, $60,000 applied to the land and $340,000 to| | |the building which has an estimated useful life of 80 years. A cash payment of $80,000 was made at the | | |time of the purchase, and a note payable was issued for the remaining balance. | |Aug 5 |Issued bonds, $200,000. Maturity period for the bonds was 3 years. Coupon interest rate was 9% and | | |interest was to be paid semiannually. | |Aug 9 |Medical instruments were purchased for $75,000 cash. Useful life was expected to be 10 years. | |Aug 10 |Purchased vans in cash, $6,000. Useful life was expected to be 10 years. | |Aug 11 |Made advance collections from several customers and promised to provide them with medical service during | | |August and September, $7,000. Amount of service revenue which would be earned from those customers was to | | |be equal for each day. | |Aug 12 |Purchased stocks of a corporation in cash with an intention to sell within a short period of time, $7,000.| |Aug 15 |Paid $800 for 1-year vehicle insurance | |Aug 15 |Paid $4,000 to a company for the license right of a particular medical material | |Aug 16 |Office fixtures and equipment were purchased for $25,000. Paid $10,000 at the time of purchase and agreed | | |to pay the entire remaining balance in 15 days. Useful life of those equipments was expected to be 8 | | |years. | |Aug 17 |Performed medical operation on account, $40,000 | |Aug 18 |Took deposit from a customer, $1000 | |Aug 21 |Office supplies expected to last several months were purchased for $4,200 cash. | |Aug 22 |Received $4,000 for the sale of some of the stocks purchased on August 12 and which had a cost of $2,500 | |Aug 24 |Dr. Cravati billed patients $13,000 for services rendered. Of this amount, $1,000 was received in cash, | | |and $12,000 was billed on account (due in 30 days). For $12,000, customers signed a 10%, 30-day note. | |Aug 25 |Obtained a loan from a bank, $12,000. That amount was transferred to company’s bank account. Interest rate| | |was 10% and maturity period was 3 years. | |Aug 27 |A $450 invoice was received for several newspaper advertisements placed in August. The entire amount is | | |due on September 8. | |Aug 28 |Received a $500 payment on the $12,000 account receivable recorded August 24. | |Aug 30 |Collected rental revenue, $1,300. That amount was transferred to company’s bank...
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