Question

Spicewood Stables, Inc., was established in Dripping Springs, Texas, on April 1. The company provides stables, care for animals, and grounds for riding and showing horses. You have been hired as the new assistant controller. The following transactions for April are provided for your review.

1. Received contributions from investors and issued $200,000 of common stock on April 1.
2. Acquired a barn for $142,000. On April 2, the company paid half the amount in cash and signed a three-year note payable for the balance.
3. Provided $16,000 in animal care services for customers on April 3, all on credit.
4. Rented stables to customers who cared for their own animals; received cash of $13,000 on April 4 for rent earned this month.
5. On April 5, received $1,500 cash from a customer to board her horse in May, June, and July (record as Deferred Revenue).
6. Purchased and received hay and feed supplies on account on April 6 for $3,000.
7. Paid $1,700 on accounts payable on April 7 for previous purchases.
8. Received $1,000 from customers on April 8 on accounts receivable.
9. On April 9, prepaid a two-year insurance policy for $3,600 for coverage starting in May.
10. On April 28, paid $800 in cash for water and utilities used this month.
11. Paid $14,000 in wages on April 29 for work done this month.
12. Received an electric utility bill on April 30 for $1,200 for usage in April; the bill will be paid next month.

Cash Accounts Receivable Beg. Bal Beg. Bal (a) 200,000 End. Bal End. Bal 200,000 Supplies Prepaid Insurance Beg. Bal Beg. Bal End. Bal End. Bal Buildings Accounts Payable Beg. Bal Beg. Bal End. Bal End. Bal

Answer 1

Spicewood Stables, Inc. Unadjusted Trial Balance For the Month ending April 30 Journal Enteries Debit in $ Credit in $ Trans. Particulars Debit in $ Credit in $ Cash a/c 200000 Particulars Dr. a. To Common Stock Cash 200000 124400 (Common stock issued) Accounts Receivable 15000 Prepaid Insurance 3600 Building a/c b. Supplies Dr. 142000 3000 To Cash Building Accounts Payable 71000 142000 To Note Payable 71000 2500 (Barn purchased) Deferred Revenue 1500 Note Payable 71000 Accounts Receivable a/c Dr. Common Stock C. 16000 200000 16000 To Service Revenue 16000 Service Revenue (Services provided on account) Rent Revenue 13000 Utilities Expense 2000 Cash a/c d. Dr. 13000 Wages Expense 14000 To Rent Revenue Totals 304000 13000 304000 (Rent earned) Statement of Income Cash a/c For the Month ending April 30 Dr. 1500 e. To Deferred Revenue Service Revenue 16000 1500 (Advance from client) Rent Revenue 13000 Total Revenues 29000 Supplies a/c To Accounts Payable f. Dr. 3000 Less: Utilities Expense 3000 2000 (Supplies on account) 16000 Wages Expense 14000 Preliminary Net Income 13000 Accounts Payable a/c Dr. To Cash 1700 g. Net Profit Margin = Net Income / Total Revenue 1700 (Creditors paid) = 13000 / 29000 = 44.83% Cash a/c h. Dr. 1000 To Accounts Receivable 1000 (Cash from debtors) i. Prepaid Insurance a/c Dr. 3600 To Cash 3600 (two year insurance paid) Utilities Expense a/c To Cash j. Dr. 800 800 (Water bill paid) Wages Expense a/c To Cash k. Dr. 14000 14000 (Wages paid) Utilities Expense a/c To Accounts payable I. Dr. 1200 1200 (Electricity expense on account)