## Practice Problems

### Demonstration problem

#### Solution

a. GREEN HILLS RIDING STABLE, INCORPORATED
Summary of Transactions
Month of June 2010
Assets = Liabilities + Stockholders Equity
Date Explanation Cash Accounts
Receivable
Land Accounts
Payable
Notes
Payable
Capital +
Stock
Retained
Earnings
June 1
Capital stock issued 10,000 = +$10,000 4 Rent expense (1,200)$(1,200)
$8,800 = +$10,000 $(1,200) 8 Feed expense$800 (800)
$8,800 =$800 +$10,000$(2000)
15 Boarding fees $3,000 3,000$8,800 $3,000 =$800 +$10,000$1,000
20 Miscellaneous expenses
(600) (600)
$8,200$3,000 = 800 +$10,000$400
29 Purchased land by borrowing $40,000$8,200 $3,000 =$800 $40,000 +$10,000 $400 30 Salaries paid (700)$40,000
(700)
$7,500$3,000 $40,000=$800 $40,000 +$10,000 $(300) 30 Riding and lesson fees billed 2,800 2,800$7,500 $5,800$40,000 $800$40,000 +$10,000$2,500

b)
GREEN HILLS RIDING STABLE, INCORPORATE
Income Statement
For the Month Ended 2010 June 30
Revenues:
Horse boarding fees revenue $3,000 Riding and lesson fee revenue 2,800 Total revenues$5,800
Expenses:
Rent expense $1,200 Feed expense 800 Salaries expense 700 Miscellaneous expense 600 Total expenses 3,300 Net income$2,500

c)

GREEN HILLS RIDING STABLE, INCORPORATED
Statement of Retained Earnings
For the Month Ended 2010 June 30

Retained earnings, June 1 $-0- Add: Net income for June 2,500 Total$2,500
Less: Dividends
-0-
Retained earnings, June 30 $2,500 d) GREEN HILLS RIDING STABLE, INCORPORATE Balance Sheet 2010 June 30 Cash$7,500
Accounts receivable   5,800
Land
40,000
Total assets
$53,300 Liabilities and Stockholders' Equity Liabilities: Accounts payable$800
Noted payable
40,000
Total liabilities
$40,800 Stockholders' equity: Capital stock$10,000
Retained earnings
2,500
Total stockholders' equity
$12,500 Total liabilities and stockholders' equity$53,300.00