On August 31 The Balance Sheet Of La Brava Veterinary Clinic

On August 31 The Balance Sheet Of La Brava Veterinary Clinic Showed C

Evaluate the financial activities and position of La Brava Veterinary Clinic during September by analyzing the transactions that occurred after the initial balance sheet date of August 31. The initial balance sheet provides a snapshot of the clinic's assets, liabilities, and equity, including cash, accounts receivable, supplies, equipment, accounts payable, common stock, and retained earnings. During September, the clinic engaged in various financial transactions such as paying liabilities, collecting receivables, purchasing equipment, recognizing revenue, dividends, expenses, and obtaining a note payable from a bank. Your task is to prepare a comprehensive analysis that involves updating the clinic's financial statements — specifically the balance sheet and income statement — to reflect these September activities. Additionally, assess the impact of these transactions on the clinic’s liquidity, profitability, and overall financial position.

Paper For Above instruction

The purpose of this paper is to analyze the financial transactions of La Brava Veterinary Clinic during September and to update the financial statements accordingly. Beginning with the initial balance sheet as of August 31, the analysis will include changes brought about by each transaction during September. This examination aids in understanding how operational activities influence the fiscal health of a veterinary clinic.

Initial Financial Position as of August 31

The initial balance sheet shows that La Brava Veterinary Clinic had total assets of $17,300, comprising cash ($9,000), accounts receivable ($1,700), supplies ($600), and equipment ($6,000). Its liabilities consisted of accounts payable ($3,600), and equity was represented by common stock ($13,000) and retained earnings ($700). This snapshot indicates a healthy financial standing with positive working capital, and a stockholder’s equity of $13,700 ($13,000 in common stock plus $700 retained earnings).

September Transactions and Their Impact

In September, the clinic conducted several transactions which affected its financial position. These include paying off accounts payable, collecting receivables, purchasing equipment, recognizing revenues, paying dividends, expenses, and receiving a bank loan. The detailed impact of each transaction is summarized below:

1. Payment of Accounts Payable - $2,900

This transaction reduces the clinic’s cash by $2,900 and decreases accounts payable by the same amount, reflecting a reduction in liabilities and an improvement in liquidity. After this payment, cash balance decreases from $9,000 to $6,100, and accounts payable decreases from $3,600 to $700.

2. Collection of Accounts Receivable - $1,300

Collection of receivables increases cash by $1,300 and decreases accounts receivable by the same amount. Cash increases from $6,100 to $7,400; accounts receivable decreases from $1,700 to $400. This improves liquidity and reduces outstanding receivables.

3. Purchase of Equipment - $2,100 (cash $800 + on account $1,300)

The acquisition of equipment increases equipment assets by $2,100. Cash decreases by $800, reducing current assets to $6,600. The remaining balance on equipment purchase, $1,300, increases accounts payable from $700 to $2,000. This transaction indicates investment in equipment financed partly through cash and partly through credit.

4. Revenue Recognition - $7,300 (cash $2,500, receivables $4,800)

The clinic recognizes total revenue of $7,300. Cash collected increases cash to $9,900, while the uncollected revenue of $4,800 increases accounts receivable, totaling $5,200 post-transaction (initial $400 + $4,800). This also impacts retained earnings, increasing it through earned revenue. The revenue recognition enhances net income and retained earnings.

5. Payment of Dividends - $400

Dividends paid are recorded as a reduction in retained earnings and decrease cash by $400, reducing cash from $9,900 to $9,500. This usage of cash affects the liquidity but does not affect income.

6. Expenses Paid - Salaries $1,700; Rent $900; Advertising $200

These operating expenses total $2,800 and decrease cash from $9,500 to $6,700. Expenses reduce net income and consequently, retained earnings. Salaries and rent payments are typical operational costs, and advertising expenses support marketing efforts.

7. Utilities Expense on Account - $170

This utilities expense increases liabilities (utilities payable) by $170 and reduces net income. Since paid on account, cash remains unaffected until payment is made, potentially in a future period.

8. Bank Note Receipt - $10,000

Receipt of a 6-month note payable increases cash by $10,000 and liabilities by the same amount, reflecting a short-term borrowing. This inflow boosts liquidity but increases obligations that will need repayment later.

Updated Financial Position

After incorporating all September activities, the adjusted financial statements reveal an increase in assets mainly driven by cash and equipment, tempered by payments on liabilities and expenses. Liabilities increased due to the note payable and equipment on account, while assets increased through equipment purchase and revenue collection. The net income generated during September will increase retained earnings, but dividends reduce it. The overall liquidity position remains strong, with significant cash and short-term receivables, although liabilities have increased with the bank loan and accounts payable. Profitability improves based on the recognized revenue and controlled expenses.

Conclusion

Analyzing the September transactions demonstrates the dynamic nature of a veterinary clinic’s financial health. The adjustments show a positive trend in cash flow from increased revenue and bank financing, which enhances liquidity. However, liabilities also increase due to equipment purchase on credit and borrowing from the bank. Management should continue monitoring receivables and expenses to sustain profitability. The updated financial statements provide a clearer picture of operational efficiency and financial stability, vital for decision-making and strategic planning.

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