2. The Accounting Cycle: Journalizing, Posting, and Preparing a Trial Balance Dr. Schekter, DVM, opened a veterinary clinic on May 1, 2015. The business transactions for May are shown below:

May 1 Dr. Schekter invested $400,000 cash in the business in exchange for 5,000 shares of capital stock.

May 4 Land and a building were purchased for $250,000. Of this amount, $70,000 applied to the land, and $180,000 to the building. A cash payment of $100,000 was made at the time of the purchase, and a note payable was issued for the remaining balance.

May 9 Medical instruments were purchased for $130,000 cash.

May 16 Office fixtures and equipment were purchased for $50,000. Dr. Schekter paid $20,000 at the time of purchase and agreed to pay the entire remaining balance in 15 days.

May 21 Office supplies expected to last several months were purchased for $5,000 cash.

May 24 Dr. Schekter billed clients $2,200 for services rendered. Of this amount, $1,900 was received in cash, and $300 was billed on account (due in 30 days). May A $400 invoice was received for several radio advertisements aired in May. The 27 entire amount is due on June 5.

May 28 Received a $100 payment on the $300 account receivable recorded May 24.

May 31 Paid employees $2,800 for salaries earned in May.

A partial list of account titles used by Dr. Schekter includes:

Cash	Notes Payable
Accounts Receivable	Accounts Payable
Office Supplies	Capital Stock
Medical Instruments	Veterinary Service Revenue
Office Fixtures and Equipment	Advertising Expense
Land	Salary
Expense Building

Instructions

a. Analyze the effects that each of these transactions will have on the following six components of the companys financial statements for the month of May. Organize your answer in tabular form, using the column headings shown below. Use I for increase, D for decrease, and NE for no effect. T

he May 1 transaction is provided for you:

	Income Statement			Balance sheet
transaction	Transaction Revenue +	Expense =	Net Income	Assets +	Liabilities +	Owners' Equity
MAY1	NE	NE	NE	I	NE	I

b Prepare journal entries (including explanations) for each transaction.

c. Post each transaction to the appropriate ledger accounts

d. Prepare a trial balance dated May 31, 2015.

e. Using figures from the trial balance prepared in part d, compute total assets, total liabilities, and owners equity. Did May appear to be a profitable month?