Question

Ashley Stamper opened a medical practice. During July, the first month of operation, the business, titled Ashley Stamper, MD, experienced the following events: Jul. 6 Received a contribution of \(68,000 from Stamper and opened a bank account in the name of A. Stamper, MD. The corporation issued common stock to Stamper. 9 Paid \)56,000 cash for land. 12 Purchased medical supplies for \(1,500 on account. 15 Officially opened for business. 20 Paid cash expenses: employees’ salaries, \)1,300; office rent, \(1,500; utilities, \)100. 31 Earned service revenue for the month, \(13,000, receiving cash. 31 Paid \)1,050 on account. Analyze the effects of these events on the accounting equation of the medical practice of Ashley Stamper, MD, using the following format:

+ – ASSETS EQUITY Rent Expense – Utilities Expense Common – Stock Contributed Capital + + Dividends Retained Earnings – Salaries Expense Service Revenue + Medical Supplies C

Short answer

Effect of the transaction on the accounting equation is shown as follows:

	Assets	=	Liabilities	+	Equity
Contributed Capital	+	Retained Earnings
Cash	+	Medical Supplies	+	Land	Accounts Payable	Common Stock	-	Dividends	+	Service Revenue	-	Salaries Expense	-	Rent Expense	-	Utilities Exp[ense
July 6	+68,000					=		+	+68,000
Bal.	$68,000					=		+	$68,000
July 9	-56,000				+56,000	=		+
Bal.	$12,000			+	$56,000	=		+	$6 8,000
July 12			+1,500			=	+1,500	+
Bal.	$12,000	+	$1,500	+	$56,000	=	$1,500	+	$68,000
July 15	-		-		-	=	-	+	-		-		-		-		-		-
Bal.	$12,000	+	$1,500	+	$56,000	=	$1,500	+	$68,000
July 20	-2,900					=		+							-1,300		-1,500		-100
Bal.	$9,100	+	$1,500	+	$56,000	=	$1,500	+	$68,000					-	$1,300	-	$1,500	-	$100
July 31	+13,000					=		+					+1,3000
July 31	-1,050					=	-1,050	+
Bal.	$21,050	+	$1,500	+	$56,000	=	$450	+	$68,000	-	-	+	$13,000	-	$1,300	-	$1,500	-	$1,00
	$78,550		$78,550

Step-by-step solution

Explanation on Transaction Analysis

Trasaction analysis helps in analyzing the effect of the transaction on the accounting equation.

Explanation on Accounting Equation

As per the accounting equation,both side of the accounting equation should be equal.