Drs. Glenn Feltham and Gary Entwistle began operations of their physical therapy clinic called Northland Physical Therapy on January 1, 2014. The annual reporting period ends December 31. The trial balance on January 1, 2015, was as follows (the amounts are rounded to thousands of dollars to simplify):

Account Titles Debit Credit
Cash $ 7
Accounts Receivable 3
Supplies 3
Equipment 8
Accumulated Depreciation $ 1
Software 5
Accumulated Amortization 1
Accounts Payable 5
Notes Payable (short-term) 0
Salaries and Wages Payable 0
Interest Payable 0
Income Tax Payable 0
Unearned Revenue 0
Common Stock 15
Retained Earnings 4
Service Revenue 0
Depreciation Expense 0
Amortization Expense 0
Income Tax Expense 0
Interest Expense 0
Supplies Expense 0
Totals $ 26 $ 26 Transactions during 2018 (summarized in thousands of dollars) follow:

a. Borrowed $22 cash on July 1, 2018, signing a six-month note payable.

b. Purchased equipment for $25 cash on July 2, 2018.

c. Issued additional shares of common stock for $5 on July 3.

d. Purchased software on July 4, $3 cash.

e. Purchased supplies on July 5 on account for future use, $7.

f. Recorded revenues on December 6 of $55, including $8 on credit and $47 received in cash.

g. Recognized salaries and wages expense on December 7 of $30; paid in cash.

h. Collected accounts receivable on December 8, $9.

i. Paid accounts payable on December 9, $10.

j. Received a $3 cash deposit on December 10 from a hospital for a contract to start January 5, 2019.

Data for adjusting journal entries on December 31:

k. Amortization for 2018, $1.

l. Supplies of $3 were counted on December 31, 2018.

m. Depreciation for 2018, $4.

n. Accrued interest of $1 on notes payable.

o. Salaries and wages incurred but not yet paid or recorded, $3.

p. Income tax expense for 2018 was $4 and will be paid in 2019.

Required:

1. Set up T-accounts for the accounts on the trial balance and enter beginning balances. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you.

2. Record journal entries for transactions (a) through (j).

3. Post the journal entries from requirement 2 to T-accounts and prepare an unadjusted trial balance. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you using your answers to requirement 2.

4. Record the adjusting journal entries (k) through (p).

5. Post the adjusting entries from requirement 4 and prepare an adjusted trial balance. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you using your previous answers.

6. Prepare an income statement, statement of retained earnings, and balance sheet.

7. Prepare the closing journal entry.

8. Post the closing entry from requirement 7 and prepare a post-closing trial balance. If you are completing this problem in Connect using the general ledger tool, this requirement will be completed for you using your previous answers.

9. How much net income did the physical therapy clinic generate during 2018? What was its net profit margin? Is the business financed primarily by liabilities or stockholders’ equity? What is its current ratio?