Exercise 318 Novak MD maintains the accounting records of No

Exercise 3-18 Novak, M.D., maintains the accounting records of Novak Clinic on a cash basis. During 2017, Dr. Novak collected $155,992 from his patients and paid $60,414 in expenses. At January 1, 2017, and December 31, 2017, he had accounts receivable, unearned service revenue, accrued expenses, and prepaid expenses as follows. (All long-lived assets are rented.) Accounts receivable Unearned service revenue Accrued expenses Prepaid expenses January 1, 2017 $8,733 2,669 3,096 2,035 December 31, 2017 $17,087 4,464 2,024 2,924 Prepare a schedule that converts Dr. Novak\'s \"excess of cash collected over cash disbursed\" for the year 2017 to net income on an accrual basis for the year 2017 NOVAK, M.D Conversion of Cash Basis to Accrual Basis For the Year 2017

Solution

Dr.Novak maintains the records of his Clinic on Cash basis.

With the given information we have to show the records on accrual basis

In Cash basis we record the cash transation but in Accrual basis we record all the transactions pertaining to the period.

A. Total amount collected in the year 2017 on Cash basis = $115,992

B. Total amount spent in the year 2017 on cash basis = $60414

C. Total cash balance by the end of the year 2017 (A - B) = $55,578

Accrual basis of accounting for the year ended 2017

A. Total amount collected in cash = $115,992

B. Total amount receivable = $17,087

C. Unearned service revenue = $4,464

D. Prepaid Expenses = $2,924

E. Total Income (A+B+C+D) = $140,467

F. Expenses paid ($60,414 - $2,924) = $57,490

G. Accrued Expenses = $2,024

H. Total Expenses ( F+G) = $59,514

I. Net Income for the year 2017 ( E-H) = $80,953