# 2.12: Demonstration problem

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Green Hills Riding Stable, Incorporated, had the following balance sheet on 2010 June 30:

 GREEN HILLS RIDING STABLE, INCORPORATED Balance Sheet 2010 June 30 Assets Cash $7,500 Accounts receivable 5,400 Land 40,000 Total assets$ 52,900 Liabilities and Stockholders' Equity Liabilities: Accounts payable $800 Notes payable 40,000 Total liabilities$ 40,800 Stockholders' equity: Capital stock $10,000 Retained earnings 2,100 Total stockholders' equity 12,100 Total liabilities and stockholders' equity$52,900

a. Prepare the journal entries to record the transactions for July 2010.

b. Post the journal entries to the ledger accounts after entering the beginning balances in those accounts. Insert cross-indexing references in the journal and ledger. Use the following chart of accounts:

 100 Cash 320 Dividends 103 Accounts Receivable 402 Horse Boarding Fees Revenue 130 Land 404 Riding and Lesson Fees Revenue 140 Buildings 507 Salaries Expense 200 Accounts Payable 513 Feed Expense 201 Notes Payable 540 Interest Expense 300 Capital Stock 568 Miscellaneous Expense 310 Retained Earnings

c. Prepare a trial balance.

Solution to demonstration problem

a.

 GREEN HILLS RIDING STABLE, INCORPORATED General Journal Page1 Date Account Titles and Explanation Post. Ref. Debit Credit 2010 July 1 Cash (+A) 100 2 5 0 0 0 Capital Stock (+SE) 300 2 5 0 0 0 Additional capital stock issued. 1 Buildings (+A) 140 2 4 0 0 0 Cash (-A) 100 2 4 0 0 0 Paid for building. 8 Account Payable (-L) 200 8 0 0 Cash (-A) 100 8 0 0 Paid accounts payable. 10 Cash (+A) 100 5 4 0 0 Accounts Receivable (-A) 103 5 4 0 0 Collected accounts receivable. 12 Feed Expense (-SE) 513 1 1 0 0 Accounts Payable (+L) 200 1 1 0 0 Purchased feed on account 15 Accounts Receivable (+A) 103 4 5 0 0 Horse Boarding Fee Revenue (+SE) 402 4 5 0 0 Billed boarding fees for July. 24 Miscellaneous Expense (-SE) 568 8 0 0 Cash (-A) 100 8 0 0 Paid miscellaneous expenses for July. 31 Interest Expense (-SE) 540 2 0 0 Cash (-A) 100 2 0 0 Paid interest 31 Salaries Expense (-SE) 507 1 4 0 0 Cash (-A) 100 1 4 0 0 Paid salaries for July. 31 Accounts Receivable (+A) 103 3 6 0 0 Riding and Lesson Fee Revenue (+SE) 404 3 6 0 0 Billed riding and lesson fees for July. 31 Dividends (-SE) 320 1 0 0 0 Cash (-A) 100 1 0 0 0 Paid a dividend to stockholders.

 b.                              GREEN HILLS RIDING STABLE, INCORPORATED General Ledger Land                                                               Account No. 100 Date Explanation Post Ref. Debt Credit Balance 2010 June 30 Balance 7 5 0 0 0 Dr July 1 Stockholders' investment G1 2 5 0 0 0 3 2 5 0 0 Dr 1 Buildings G1 2 4 0 0 0 8 5 0 0 Dr 8 Accounts payable G1 8 0 0 7 7 0 0 Dr 10 Accounts receivable G1 5 4 0 0 1 3 1 0 0 Dr 24 Miscellaneous expense G1 8 0 0 1 2 3 0 0 Dr 31 Interest expense G1 2 0 0 1 2 1 0 0 Dr 31 Salaries expense G1 1 4 0 0 1 0 7 0 0 Dr 31 Dividends G1 1 0 0 0 9 7 0 0 Dr

 Accounts Receivable                                             Account No. 103 Date Explanation Post Ref. Debt Credit Balance 2010 June 30 Balance 5 4 0 0 Dr July 10 Cash G1 5 4 0 0 - 0 - 15 Horse boarding fees G1 4 5 0 0 4 5 0 0 Dr 31 Riding and lessons fees G1 3 6 0 0 8 1 0 0 Dr Land                                                          Account No. 130 Date Explanation Post Ref. Debt Credit Balance 2010 June 30 Balance 4 0 0 0 0 Dr Buildings                                                    Account No. 140 Date Explanation Post Ref. Debt Credit Balance 2010 July 1 Cash G1 2 4 0 0 0 2 4 0 0 0 Dr

 Accounts Payable                                               Account No. 200 Date Explanation Post Ref. Debt Credit Balance 2010 June 30 Balance 8 0 0 Cr July 8 Cash G1 8 0 0 - 0 - 12 Feed expense G1 1 1 0 0 1 1 0 0 Cr

 General Ledger (continued) Notes Payable                                                    Account No. 201 Date Explanation Post Ref. Debt Credit Balance 2010 June 30 Balance 4 0 0 0 0 Cr Capital Stock                                                     Account No. 300 Date Explanation Post Ref. Debt Credit Balance 2010 June 30 Balance 1 0 0 0 0 Cr July 1 Cash G1 2 5 0 0 0 3 5 0 0 0 Cr Retained Earnings                                               Account No. 310
 Date Explanation Post Ref. Debt Credit Balance 2010 June 30 Balance 2 1 0 0 Cr Dividends                                                    Account No. 320 Date Explanation Post Ref. Debt Credit Balance 2010 July 31 Cash G1 1 0 0 0 1 0 0 0 Dr Horse Boarding Fee Revenue                                           Account No. 402 Date Explanation Post Ref. Debt Credit Balance 2010 July 15 Accounts receivable G1 4 5 0 0 4 5 0 0 Cr Riding and Lesson Fee Revenue                                         Account No. 404 Date Explanation Post Ref. Debt Credit Balance 2010 July 31 Accounts receivable G1 3 6 0 0 3 6 0 0 Cr General Ledger (concluded) Salaries Expense                                                  Account No. 507 Date Explanation Post Ref. Debt Credit Balance 2010 July 31 Cash G1 1 4 0 0 1 4 0 0 Dr Feed Expense                                                  Account No. 513 Date Explanation Post Ref. Debt Credit Balance 2010 July 12 Accounts payable G1 1 1 0 0 1 1 0 0 Dr Interest Expense                                               Account No. 540 Date Explanation Post Ref. Debt Credit Balance 2010 July 31 Cash G1 2 0 0 2 0 0 Dr Miscellaneous Expense                                            Account No. 568 Date Explanation Post Ref. Debt Credit Balance 2010 July 24 Cash G1 8 0 0 8 0 0 Dr

 c. GREEN HILLS RIDING STABLE, INCORPORATED Trial Balance 2010 July 31 Acct. No. Account Title Debits Credits 100 Cash $9,700 103 Accounts Receivable 8,100 130 Land 40,000 140 Buildings 24,000 200 Accounts Payable$ 1,100 201 Notes Payable 40,000 300 Capital Stock 35,000 310 Retained Earnings 2,100 320 Dividends 1,000 402 Horse Boarding Fee Revenue 4,500 404 Riding and Lesson Fee Revenue 3,600 507 Salaries Expense 1,400 513 Feed Expense 1,100 540 Interest Expense 200 568 Miscellaneous Expense 800 $86,300$86,300

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