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

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