Question

6 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 Aprilare provided for your review. points a. Received contributions from investors and issued $210,000 of common stock on April b. Acquired a barn for $140,000. On April 2, the company paid half the amount in cash and signed a three-year note payable for the balance Provided $24,500 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 $22.500 on April 4 for rent earned this month. e. On April 5, received $3,950 cash from a customer to board her horse in May, June, and July record as Deferred Revenue) Purchased and received hay and feed Supplies on account on April 6 for $3,100. 9. Pald $3,500 on accounts payable on April 7 for previous purchases. Received $1060 from customers on April 8 on accounts receivable On April 9, prepaid a two year insurance policy for $3,700 for coverage starting in May On April 28, paid $1,490 in cash for water and utilities used this month k Paid $14,600 in wages on April 29 for work done this month 1. Received an electric utility bill on April 30 for $1360 for usage in April; the bit will be paid next month. References Required: 1. Prepare the journal entry for each of the above transactions 2. Post the transaction activity from requirement to the 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 not profit margin 4-b. Determine whether the net profit margin is better or worse than the 300 percent earned by a close competitor

Answer 1

	Journal
Date	Account Title and Explanations	Amount ($)
		Debit	Credit
a	Cash	210,000.00
	Common Sock		210,000.00
b	Barn	140,000.00
	Cash		70,000.00
	Note Payable (Barn)		70,000.00
c	Accounts Receivable	24,500.00
	Service Revenue		24,500.00
d	Cash	22,500.00
	Rent Earned		22,500.00
e	Cash	3,950.00
	Deffered Revenue		3,950.00
f	Purchase (Hay and Feed Supplies)	3,100.00
	Accounts payable		3,100.00
g	Accounts Payable	3,100.00
	Advance to Acconts Payable	400.00
	cash		3,500.00
h	Cash	1,060.00
	Account Receivable		1,060.00
i	Prepaid Insurance	3,700.00
	Cash		3,700.00
j	Water & Utilities	1,490.00
	Cash		1,490.00
k	Wages	14,600.00
	Cash		14,600.00
l	Electricity Bill	1,360.00
	Outstanding Liability		1,360.00
Total		429,760.00	429,760.00

Ledgers

Common Stock Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Balance 210,000.00 Cash 210,000.00 Total 210,000.00 210,000.00 Cash Amount (Dr.) Date Date Particulars Particulars Amount (Cr.) 70,000.00 Common Sock Rent Earned 210,000.00 22,500.00 3,100.00 400.00 3,700.00 Deffered Revenue Account Receivable Barn Accounts Payable Advance to Acconts Payable Prepaid Insurance Water & Utilities Wages Balance 3,950.00 1,060.00 1,490.00 14,600.00 144,220.00 Total 237,510.00 Total 237,510.00

Barn Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Balance 140,000.00 Cash Note Payable (Barn) Total 70,000.00 70,000.00 140,000.00 Total 140,000.00 Note Payable (Barn) Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Balance 70,000.00 Barn 70,000.00 Total 70,000.00 Total 70,000.00 Accounts Receivable Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Service Revenue 24,500.00 Cash Balance 1,060.00 23,440.00 24,500.00 Total 24,500.00 Total

Service Revenue Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Balance 24,500.00 Accounts Receivable 24,500.00 Total 24,500.00 Total 24,500.00 Rent Earned Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Balance 22,500.00 Cash 22,500.00 Total 22,500.00 Total 22,500.00 Deferred Revenue Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Balance 3,950.00 Cash 3,950.00 Total 3,950.00 Total 3,950.00

Purchase (Hay and Feed Supplies) Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Accounts payable 3,100.00 Balance 3,100.00 Total 3,100.00 Total 3,100.00 Accounts Payable Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Cash 3,100.00 Purchase (Hay and Feed Supplies) 3,100.00 Total 3,100.00 Total 3,100.00 Advance to Accounts payable Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Cash 400.00 Balance 400.00 Total 400.00 Total 400.00

Prepaid Insurance Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Cash 3,700.00 Balance 3,700.00 Total 3,700.00 Total 3,700.00 Water & Utilities Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Cash 1,490.00 Balance 1,490.00 Total 1,490.00 Total 1,490.00 Electricity Bills Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Outstanding Liability 1,360.00 Balance 1,360.00 Total 1,360.00 Total 1,360.00

Outstanding Liability Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Balance 1,360.00 Electricity Bills 1,360.00 Total 1,360.00 Total 1,360.00 Wages Amount (Dr.) Date Particulars Date Particulars Amount (Cr.) Cash 14,500.00 Balance 14,600.00 Total 14,600.00 Total 14,600.00

Trial Balance

Trial Balance April 30 Debit Credit Common Stock 210,000.00 Cash 144,220.00 140,000.00 70,000.00 23,440.00 24,500.00 22,500.00 3,950.00 Barn Note Payable (Barn) Accounts Receivable Service Revenue Rent Earned Deferred Revenue Purchase (Hay and Feed Supplies) Advance to Accounts payable Prepaid Insurance Water & Utilities Electricity Bills Outstanding Liability Wages 3,100.00 400.00 3,700.00 1,490.00 1,360.00 1,360.00 14,600.00 332,310.00 332,310.00

Profit and Loss

Preliminary Net Income Revenue Service Revenue Rent Earned 24,500.00 22,500.00 47,000.00 Expenses Purchase (Hay and Feed Supplies) Water & Utilities Electricity Bills Wages 3,100.00 1,490.00 1,360.00 14,600.00 20,550.00 Profit 26,450.00 56.28 Net Profit Margin (Profit/Total Revenue *100)

The Net profit margin is better than the close competitors. Net Margin is 58.28 %.