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2.12: Demonstration problem

  • Page ID
    48919
  • 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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