Lisa Laurel opened a riding stables in April of 2011 with the sale of stock in the amount of $10,000 in the name of Lisa Laurel Riding Stables, all of which she bought herself. It opened asset accounts including the following: Cash, Accounts Receivable, Office Supplies, Hay and Feed, Stable Equipment and Office Equipment and Furniture. Liability accounts included Accounts Payable, Notes Payable, and Advance Fees Unearned. There are two stockholders equity accounts: Common Stock and Dividends. Lisa Laurel Riding Stables was planning to earn revenue from two different sources, and set up the following accounts, Revenue, Riding Lessons, and Revenue, Stable Rental. Expense accounts include Wages Expense, Hay and Feed Expense, and Utility Expense. During the month of May, an inexperienced bookkeeper (always blame the bookkeeper!) was used to keep the accounts. Select journal entries from the month follow:

REQUIRED: 1) Examine each journal entry. If the entry is correct, so state. If the entry is incorrect, rewrite the entry as it should be recorded. Assume that the transaction description is correct. 2) Which transactions, if uncorrected, would keep the trial balance from balancing? 3) How much was the Cash account overstated or understated? 4) how much is Net income overstated or understated? HINT: There are no errors in Entry 1 or 10. There are more than one error in several of the entries.

1) 5/1 Cash 10,000

Common stock 10,000

Sold $10,000 more of common stock for cash to run the business

2) 5/2 Hay and Feed Expense 1700

Cash 1700

Bought Hay and Feed on account

3) 5/2 Stable Equipment 1,500

Cash 5,100

Bought office furniture with value of $1,500

4) 5/3 Cash 5,200

Revenue, Riding Lessons 5,200

Accepted fees in advance for riding lessons to start in June

5) 5/10 Accounts Receivable 1,250

Revenue, Stable Rental 1,250

Earned riding lesson fees on account

6) 5/15 Office Equipment 251

Accounts payable 215

Bought office supplies costing $251 on account

7) 5/25 Cash 250

Accounts payable 250

Paid off a creditor

8) 5/29 Utility expense 300

Cash 300

Recorded utility expense for May; will pay in June.

9) 5/31 Wages expense 2,000

Cash 2,000

Withdrew $2,000 for personal use.

10) 5/31 Cash 500

Accounts receivable 500

Received payment on account from credit customers.