Caren Smith opened a medical practice. During July, the first month of operation, the business, titled Caren Smith, M.D., experienced the following events:

Jul 6

Smith invested $55,000 in the business by opening a bank account in the name of C. Smith, M.D. The business gave capital to Smith.
9

12

Purchased medical supplies for $1,800 on account.
15

Officially opened for business.
15–31

During the rest of the month, Smith treated patients and earned service revenue of $8,000, receiving cash.
29

Paid cash expenses: employees’ salaries, $1,600; office rent, $900; utilities, $100.
30

Returned supplies purchased on the 12th for the cost of those supplies, $700.
31

Paid $1,100 on account.
Requirement
1. Analyze the effects of these events on the accounting equation of the medical practice of Caren Smith, M.D. Use a format similar to that of Exhibit 1-6, with headings for Cash; Medical supplies; Land; Accounts payable; and Smith, capital.

Cash: +55,000; +8,000; -1,600; -900; -100; +700; -1,100

Medical Supplies: +1,800; -700
Land: 0
Accounts Payable: +1,800; -1,100
Smith, Capital: +55,000

To analyze the effects of these events on the accounting equation of the medical practice of Caren Smith, M.D., we can use the format similar to Exhibit 1-6 and consider the headings for Cash, Medical Supplies, Land, Accounts Payable, and Smith, Capital.

1. Cash:

- July 6: Smith invested $55,000 in the business by opening a bank account. The cash increases by $55,000.

- July 15-31: Smith earned service revenue of $8,000 and received cash. The cash increases by $8,000.

- July 29: Paid cash expenses - employees' salaries ($1,600), office rent ($900), utilities ($100). The cash decreases by $2,600.

- July 30: Returned supplies purchased on the 12th for the cost of those supplies ($700). The cash increases by $700.

- July 31: Paid $1,100 on account. The cash decreases by $1,100.

Overall, the net effect of these events on cash is an increase of $55,000 + $8,000 + $700 - $2,600 - $1,100 = $60,000.

2. Medical Supplies:

- July 12: Purchased medical supplies for $1,800 on account. The medical supplies increase by $1,800.

- July 30: Returned supplies purchased on the 12th for the cost of those supplies ($700). The medical supplies decrease by $700.

Overall, the net effect of these events on medical supplies is an increase of $1,800 - $700 = $1,100.

3. Land:

There are no events mentioned in the given information that affect land.

4. Accounts Payable:

- July 12: Purchased medical supplies for $1,800 on account. The accounts payable increase by $1,800.

- July 31: Paid $1,100 on account. The accounts payable decrease by $1,100.

Overall, the net effect of these events on accounts payable is an increase of $1,800 - $1,100 = $700.

5. Smith, Capital:

- July 6: Smith invested $55,000 in the business. The capital of Smith increases by $55,000.

Overall, the net effect of these events on Smith, Capital is an increase of $55,000.

In summary, the effects of these events on the accounting equation for the medical practice of Caren Smith, M.D. are as follows:

Assets (Cash + Medical Supplies) = Liabilities (Accounts Payable) + Owner's Equity (Smith, Capital)

$60,000 + $1,100 = $700 + $55,000

To analyze the effects of these events on the accounting equation of the medical practice of Caren Smith, M.D., we need to understand the accounting equation itself. The accounting equation is:

Assets = Liabilities + Owner's Equity

Now let's analyze the effects of each event on the different elements of the accounting equation:

1. Event: Smith invested $55,000 in the business by opening a bank account in the name of C. Smith, M.D. The business gave capital to Smith.

This transaction has the following effect:
- Cash (an asset) increases by $55,000.
- Smith, capital (owner's equity) increases by $55,000.

2. Event: Purchased medical supplies for $1,800 on account.

This transaction has the following effect:
- Medical supplies (an asset) increases by $1,800.
- Accounts payable (a liability) increases by $1,800.

3. Event: Officially opened for business.

This event does not have any direct impact on the accounting equation.

4. Event: Smith treated patients and earned service revenue of $8,000, receiving cash.

This transaction has the following effect:
- Cash (an asset) increases by $8,000.
- Service revenue (owner's equity) increases by $8,000.

5. Event: Paid cash expenses: employees’ salaries, $1,600; office rent, $900; utilities, $100.

This transaction has the following effect:
- Cash (an asset) decreases by $2,600 (sum of salaries, rent, and utilities).

6. Event: Returned supplies purchased on the 12th for the cost of those supplies, $700.

This transaction has the following effect:
- Medical supplies (an asset) decreases by $700.
- Cash (an asset) decreases by $700.

7. Event: Paid $1,100 on account.

This transaction has the following effect:
- Accounts payable (a liability) decreases by $1,100.
- Cash (an asset) decreases by $1,100.

Now let's summarize the effects of these events on the elements of the accounting equation in a format similar to Exhibit 1-6:

- Cash:
- Increases: $55,000 + $8,000
- Decreases: $2,600 + $700 + $1,100

- Medical supplies:
- Increases: $1,800
- Decreases: $700

- Land:
- No transactions mentioned, so no change.

- Accounts payable:
- Increases: $1,800
- Decreases: $1,100

- Smith, capital:
- Increases: $55,000 + $8,000

Finally, the totals for the increases and decreases may be calculated to ascertain the final balances in the accounting equation.