Question

                                                       HORSE RIDING REALTY COMPAMY

                                                            BALANCE SHEET

                                                       As of September 31, 2020

ASSETS                                                        LIABILITY

Cash                                     $160,000                 Accounts Payable      $100,000      

Accounts Rec.                       $40,000                 Wages Payable              $50,000

Supplies                                   $8,000                 Note Payable 6%        $100,000

Prepaid Rent                        $11,000                 Deferred Revenue        $50,000              

Prepaid Ins                             $9,000                          Total Liability                      $300,000

Equipment         $240,000                                     EQUITY

       Acc. Depr.     $20,000 $220,000

Land                                      $52,000                 Common Stock            $110,000

          Total Assets              $500,000                 Retained Earnings     $ 90,000

                                                                                      Total Equity                           $200,000                   

                                                                              Total Liability & Equity               $500,000

1. Oct. 1 Horse purchase $10,000 of supplies – paid cash

2. Oct. 2 Horse purchase equipment for $300,000, paid $60,000 in cash this date and signed a 8% note for the balance. Full payment of principle and interest due in 2025. This asset has a useful life of five years.

3. Oct. 3 Horse paid $12,000 cash to cover the office rent for October.

4. Oct. 5 Horse billed clients for $25,000 of work performed.

5. Oct. 7 Horse paid employees $50000 in cash for wages earned for September.

6. Oct. 15 Horse sold 40,000 shares in Horse Riding Reality Stock for $20 a share. Cash was received that afternoon - Direct deposit.

7. Oct. 20 Horse announced a cash dividend of $60,000 to be paid to shareholders who owned shares on November 1, 2020. Payment would be made on January 2, 2021.

8. Oct. 30 The prepaid insurance listed on the 9/31/20 ending balance sheet was a two year converge period and was placed on the balance sheet on September 30, 2020.

9. Oct. 30 Useful life of equipment listed on the prior balance sheet is 10 years.

10. Commission Fees earned this month were $220,000. Horse’s accountants realized October 2020 would be the first month in history that there would be no deferred revenue on the balance sheet.

11. Oct. 31. Balance on the supplies is $1500.

12. Oct. 31 Income Tax Rate for Werner is 20%.

13. October 31 – Prepare Financial Statements for the Month of October

Answer 1

HORSE RIDING REALTY COMPAMY
INCOME STATEMENT
REVENUE
SERVICE REVENUE	25000
COMMISION EARNED	220,000
EXPENSES
SUPPLIES CONSUMED	16500
INTEREST ACCRUED 8%	1600
INTEREST ACCRUED 6%	500
OFFICE RENT	12000
INSURANCE ACCRUED	375
DEPRECIATION-EQUIPMENT	7000
NET INCOME (REVENUE - EXPENSES)	207025
INCOME TAX	41405
PROFIT AFTER TAX	165620
DIVIDEND	60,000
ADDITION TO RETAINED EARNINGS	105620

HORSE RIDING REALTY COMPAMY
BALANCESHEET AS OF OCTOBER 31 2020
LIABILITY	AMOUNT	ASSET	AMOUNT
Account payable	100000	Cash	828000
Note payable 6%	100000	Account receivable	235000
Note payable 8%	240000	Supplies	1500
Accrued interest	2100	Prepaid rent	11000
Income tax payable	41405	Prepaid insurance	8625
Dividenpayable	60000	Equipment                  540,000
Deferred revenue	0	LESS - Depreciatio      27000	513,000
EQUITY		Land	52000
Retained earnings	195620
Common stock	910,000
	1649125		1649125