Practice Problems

Complete these practice problems. Check your answers after you finish.

Demonstration problem

On 2010 June 1, Green Hills Riding Stable, Incorporated, was organized. The following transactions occurred during June:

June 1: Shares of capital stock were issued for USD 10,000 cash.

June 4: A horse stable and riding equipment were rented (and paid for) for the month at a cost of USD 1,200.

June 8: Horse feed for the month was purchased on credit, USD 800.

June 15: Boarding fees of USD 3,000 for June were charged to those owning horses boarded at the stable. (Fee is due on July 10)

June 20: Miscellaneous expenses of USD 600 were paid.

June 29: Land was purchased from a savings and loan association by borrowing USD 40,000 on a note from that association. The loan is due to be repaid in five years. Interest payments are due at the end of each month beginning July 31.

June 30: Salaries of USD 700 for the month were paid.

June 30: Riding and lesson fees were billed to customers in the amount of USD 2,800. (Fees are due on July 10)

a) Prepare a summary of the preceding transactions. Use columns headed Cash, Accounts Receivable, Land, Accounts Payable, Notes Payable, Capital Stock, and Retained Earnings. Determine balances after each transaction to show that the basic accounting equation is in balance.

b) Prepare an income statement for June 2010.

c) Prepare a statement of retained earnings for June 2010.

d) Prepare a balance sheet as of 2010 June 30.

Source: Textbook Equity,
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