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Accounts of a Service Firm The following were the assets and liabilities of Alan Morgan, a doctor, on 1/1/2005: Buildings €710,000, Furniture €12,800, Motor Car €44,000, Amounts due from private patients €360, Medical Equipment €8,000, Cash at Bank €25,000, Telephone due €1,400 - Leaving Cert Accounting - Question 3 - 2006
Question 3
Accounts of a Service Firm The following were the assets and liabilities of Alan Morgan, a doctor, on 1/1/2005: Buildings €710,000, Furniture €12,800, Motor Car €4... show full transcript
Worked Solution & Example Answer:Accounts of a Service Firm The following were the assets and liabilities of Alan Morgan, a doctor, on 1/1/2005: Buildings €710,000, Furniture €12,800, Motor Car €44,000, Amounts due from private patients €360, Medical Equipment €8,000, Cash at Bank €25,000, Telephone due €1,400 - Leaving Cert Accounting - Question 3 - 2006
Step 1
Calculate Alan Morgan’s capital on 1/1/2005
Answer
To calculate Alan Morgan’s capital on 1/1/2005, we will list all assets and liabilities:
Assets
- Buildings: €710,000
- Furniture: €12,800
- Motor Car: €44,000
- Amounts due from patients: €360
- Medical Equipment: €8,000
- Cash at Bank: €25,000
Total Assets = €710,000 + €12,800 + €44,000 + €360 + €8,000 + €25,000 = €800,160
Liabilities
- Telephone due: €1,400
Total Liabilities = €1,400
Capital Calculation
- Capital = Total Assets - Total Liabilities
Thus, Alan Morgan's capital on 1/1/2005 is:
€800,160 - €1,400 = €798,760
Step 2
Prepare Morgan’s income and expenditure account for the year ended 31/12/2005
Answer
To prepare the income and expenditure account, we will summarize the income and expenses.
Income
- Patients' fees: €190,200 + €1,700 (amounts due) = €191,540
- Medical Card scheme: €97,800
Total Income = €191,540 + €97,800 = €289,340
Less Expenditure
- Telephone: €6,200
- Electricity: €1,600
- Receptionist's salary: €12,900 + €400 (due) = €13,300
- Magazines: €2,500
- Motor expenses: €2,300
- Auditor's fee: €2,400
- Rates: €4,600
- Insurance: €5,000
Total Expenditure = €6,200 + €1,600 + €13,300 + €2,500 + €2,300 + €2,400 + €4,600 + €5,000 = €38,900
Depreciation
- Motor Car: 10% of €44,000 = €4,400
- Medical Equipment: 25% of €8,000 = €2,000
Total Depreciation = €4,400 + €2,000 = €6,400
Net Profit Calculation
- Net Profit = Total Income - (Total Expenditure + Total Depreciation)
- Net Profit = €289,340 - (€38,900 + €6,400) = €244,040
Thus, Morgan’s Income and Expenditure account shows a net profit of €244,040.