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. a Received contributions from Investors and issued $200,000 of common stock on April 1. b. 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. c. Provided $16,000 In animal care services for customers on April 3, all on credit. d. Rented stables to customers who cared for their own animals, received cash of $13,000 on April 4 for rent earned this month e On April 5, recelved $1.500 cash from a customer to board her horse in May, June, and July (record as Deferred Revenue). f Purchased and received hay and feed supplies on account on April 6 for $3.000. g. Pald $1,700 on accounts payable on April 7 for previous purchases. h. Received $1.000 from customers on April 8 on accounts recevable. On April 9, prepaid a two-year Insurance policy for $3,600 for coverage starting in May. J. On April 28. pald $800 In cash for water and utilities used this month. k. Pald $14,000 In wages on April 29 for work done this month. 1. Recelved an electric utility bill on April 30 for $1.200 for usage in April the bill will be paid next month. Required: 1. Prepare the journal entry for each of the above transactions. 2. Post the transaction activity from requirement 1 to the T-Accounts below. All accounts begin with zero balances because this is the first month of operations. 3. Prepare an unadjusted trial balance as of April 30. 4-a. Refer to the revenues and expenses shown on the unadjusted trial balance. Based on this Information, calculate preliminary net Income and net profit margin. 4-b. Determine whether the net profit margin is better or worse than the 30.0 percent earned by a close competitor. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Rey 4A Req 4B Prepare the journal entry for each of the above transactions. (If no entry is required for a transaction/event, select "No Journal Entry Required in the first account field.) View transaction lat Journal entry worksheet 2 3 4 5 6 7 8 ..... 12 >

Answer 1

1. Journal Entries in Books of Spicewood Stables, Inc are as follows:

Journal Entries
Date	Particulars	Debit	Credit
April 1	Cash	$200,000
	Common stock		$200,000
	(Issued Common Stock to Investors)
April 2	Barn	$142,000
	Cash		$71,000
	Three-year Note Payable		$71,000
	(Acquired Barn for $142,000 where half cost is paid in cash remaining half to be paid by note.)
April 3	Accounts Receivable	$16,000
	Animal Care Service Revenue		$16,000
	(Provided Animal Care Services on account)
April 4	Cash	$13,000
	Rent Income		$13,000
	(Received Rent for Stable)
April 5	Cash	$1,500
	Unearned Revenue		$1,500
	(Received cash for boarding Horse in May, June, July)
April 6	Supplies	$3,000
	Accounts Payable		$3,000
	(Purchased hay and feed supplies on account)
April 7	Accounts Payable	$1,700
	Cash		$1,700
	(Paid for Accounts Payable)
April 8	Cash	$1,000
	Accounts Receivable		$1,000
	(Received Cash from Customers)
April 9	Prepaid Insurance	$3,600
	Cash		$3,600
	(Prepaid two year insurance starting from may)
April 28	Utilities	$800
	Cash		$800
	(Paid for Utilities of April)
April 29	Wages	$14,000
	Cash		$14,000
	(Paid for Wages of April)
April 30	Utilities	$1,200
	Accounts Payable		$1,200
	(Electric utility bill received for april to be paid in next month)
	Total	$397,800	$397,800

2. Posting of Activity in T-Accounts:

Date April 1 April 4 April 5 April 8 Particulars Common Stock $ Rent Income $ Unearned Revenue $ Accounts Receivable $ Cash Amount Date 200,000 April 2 13,000 April 7 1,500 April 9 1,000 April 28 April 29 April 30 215,500 Particulars Barn Accounts Payable Prepaid Insurance Utilities Wages Balance c/f Amount 71,000 1,700 3,600 $ $ $ 800 $ $ 14,000 124,400 215,500 $

Date April 30 Particulars Balance c/f Common Stock Amount Date $ 200,000 April 1 Particulars Cash $ Amount 200,000 $ 200,000 $ 200,000 Date April 2 April 2 Barn Amount Date 71,000 April 30 71,000 142,000 Particulars Balance c/f Amount 142,000 | Particulars Cash $ Three-year Note Pay $ $ $ $ 142,000 Date April 30 Particulars Balance c/f Three-year Note Payable Amount Date 71,000 April 2 Particulars Barn Amount 71,000 $ $ $ 71,000 $ 71,000 I Date April 3 | Particulars Animal Care Service $ Accounts Receivable Amount Date 16,000 April 8 April 30 Particulars Cash Balance c/f Amount 1,000 15,000 $ $ 16,000 $ 16,000

Date April 30 Particulars Balance c/f Animal Care Service Revenue Amount Date $ 16,000 April 3 Particulars / Accounts Receivable $ Amount 16,000 $ 16,000 $ 16,000 Date Particulars Rent Income | Amount Date | $ 13,000 April 4 Particulars $ Amount 13,000 $ 13,000 $ 13,000 Date April 30 Particulars Balance c/f Unearned Revenue Amount Date 1,500 April 5 Particulars Cash Amount 1,500 $ $ $ 1,500 $ 1,500

Date April 7 April 30 Particulars Cash Balance c/f 5 Accounts Payable Amount Date 1,700 April 6 2,500 April 30 4,200 Particulars Supplies Utilities $ $ Amount 3,000 1,200 4,200 Date April 6 Particulars Accounts Payable Supplies Expense Amount Date 3,000 April 30 Particulars Balance c/f $ Amount 3,000 $ 3,000 $ 3,000 Date April 9 Particulars Cash Prepaid Insurance Amount Date 3,600 April 30 Particulars Balance c/f $ Amount 3,600 $ $ 3,600 $ 3,600 Date April 28 April 30 Particulars Cash Accounts Payable Utitliies Amount Date 800 April 30 1,200 2,000 Particulars Balance c/f Amount 2,000 $ $ $ $ 2,000

Date April 29 Particulars Cash Wages Amount Date 14,000 April 30 Particulars Balance c/f $ / $ Amount 14,000 $ 14,000 $ 14,000

3. Unadjusted Trial Balance:

Unadjusted Trial Balance as on April 30
Account Title	Debit	Credit
Cash	$124,400
Accounts Receivable	$15,000
Prepaid Insurance	$3,600
Barn	$142,000
Supplies Expense	$3,000
Utilities	$2,000
Wages	$14,000
Accounts Payable		$2,500
Unearned Revenue		$1,500
Common Stock		$200,000
Three-year Note Payable		$71,000
Rent Income		$13,000
Animal Care Service Revenue		$16,000
Total	$304,000	$304,000

Net Preliminary Income and Net Profit Margin:

Primary Net Income for April
Revenue:
Rent Income		$13,000
Animal Care Service Revenue		$16,000
Total Revenue		$29,000
Expenses:
Supplies Expense	$3,000
Utilities	$2,000
Wages	$14,000
Total Expenses		$19,000
Net Income		$10,000
Net Profit Margin (Net Income/ Revenue X 100)		34.48%

4. Comparison of Net Profit Margin:

Spicewood Stables, Inc. is doing better than a close competitor as It's Net Profit Margin is 34.48%, which is 4.48% higher than net profit margin of the competitor.