Question Three (50 points) Dyanna Craig operates Craig Riding Academy. The academy's primary sources of revenue are riding fees and lesson fees, which are paid on a cash basis. Dyanna also boards horses for owners, who are billed monthly for boarding fees. In a few cases, boarders pay in advance of expected use. For its revenue transactions, the academy maintains the following accounts: Cash, Accounts Receivable, and Service Revenue. The academy owns 10 horses, a stable, a riding corral, riding equipment, and office equipment. These assets are accounted for in these accounts: Horses, Buildings, and Equipment. The academy also maintains the following accounts: Supplies, Prepaid Insurance, Accounts Payable, Salaries and Wages Expense, Advertising Expense, Utilities Expense, and Maintenance and Repairs Expense. Dyanna makes periodic withdrawals of cash for personal living expenses. To record Dyanna's equity in the business and her drawings, two accounts are maintained: Owner's Capital and Owner's Drawings. During the first month of operations, an Page 3 of 5 EXAMINATION QUESTION BOOKLET DR RUWENT TO R4 inexperienced bookkeeper was employed. Dyanna Craig asks you to review the following eight entries of the So entries made during the month. In each case, the explanation for the entry is correct. May 1 18000 18.000 5 2:50 250 7 300 300 14 80 800 15 Cash Owner's Capital Invested $18,000 cash in business) Cash Service Revenue (Received $250 cash for Icons provided) Cash Service Revenue Received $300 for boarding of here beginning June 1) Equipment Cash (Purchased desk and other office equipment for $800 cash) Salaries and Wages Expense Cash (lanuod chock to Dyanna Craig for personal use) Cash Service Revenue (Received $184 cash for riding fees! Maintenance and Repairs Expense Accounts Payable (Received bill of $75 from curpenter for repair services performed Supplies Cash (Purchased an estimated 2 month supply of food and hay for $1,700 on account) 400 400 20 148 184 30 75 75 31 1.700 1.700 Instructions With the class divided into groups, answer the following. (a) Identify each journal entry that is correct. For each journal entry that is incorrect, prepare the entry that should have been made by the bookkeeper. (15 points) (b) Which of the incorrect entries would prevent the trial balance from balancing? (10 points) Page 4 4 of 5 DIN RUW-SNT-T-035 EXAMINATION QUESTION BOOKLET RN: 04 ED: 18/02/2016 (c) What was the correct net income for May, assuming the bookkeeper reported net income of $4,500 after posting all 50 entries? (10 points) (d) What was the correct cash balance at May 31, assuming the bookkeeper reported a balance of $12,475 after posting all 50 entries (and the only errors occurred in the items listed above)? (15 points)