PRACTICE PROBLEM-1

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.

4 A horse stable and riding equipment were rented (and paid for) for the month at a cost of USD
1,200.
8 Horse feed for the month was purchased on credit, USD 800.
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.)
20 Miscellaneous expenses of USD 600 were paid.
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.
30 Salaries of USD 700 for the month were paid.
30 Riding and lesson fees were billed to customers in the amount of USD 2,800. (Fees are due on
July 10.)
Prepare an income statement for June 2010.
Prepare a statement of retained earnings for June 2010.
Prepare a balance sheet as of 2010 June 30.

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

GREEN HILLS RIDING STABLE, INCORPORATE 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

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GREEN HILLS RIDING STABLE, INCORPORATE Balance Sheet
2010 June 30

Liabilities and Stockholders’ Equity $ $

Stockholders’ equity
Capital stock 10,000
Retained earnings 2,500
Total stockholders’ equity $ 12,500
Current liabilities
Accounts payable $ 800
Noted payable 40,000
Total liabilities $40,800
Total liabilities and stockholders’ equity $53,300

Assets $ $
Non current assets
Land 40,000
Cash 7,500
Accounts receivable 5,800
Total assets $ 53,300

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