Question

RE 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, received $1,500 cash from a customer to board her horse in May, June, and July (record as Deferred Revenue) 1. Purchased and received hay and feed supplies on account on April 6 for $3,000 g Paid $1,700 on accounts payable on April 7 for previous purchases h. Received $1,000 from customers on April 8 on accounts receivable. 1. On April 9, prepaid a two-year insurance policy for $3,600 for coverage starting in May. J.On April 28, paid $800 in cash for water and utilities used this month. k. Paid $14,000 in wages on April 29 for work done this month. 1. Received an electric utility bill on April 30 for $1,200 for usage in April the bill will be paid next month. Ronniert < Prev 2 of 5 !!! Next >

Answer 1

1. General Journal

No	Account Title and Explanation	Debit	Credit
a	Cash	$200,000
	Common Stock		$200,000
b	Building	$142,000
	Cash		$71,000
	Notes Payable (LongTerm)		$71,000
c	Accounts Receivable	$16,000
	Service Revenue		$16,000
d	Cash	$13,000
	Rent Revenue		$13,000
e	Cash	$1,500
	Deferred Revenue		$1,500
f	Supplies	$3,000
	Accounts Payable		$3,000
g	Accounts Payable	$1,700
	Cash		$1,700
h	Cash	$1,000
	Accounts Receivable		$1,000
i	Prepaid Insurance	$3,600
	Cash		$3,600
j	Utilities Expenses	$800
	Cash		$800
k	Salaries and Wages Expense	$14,000
	Cash		$14,000
l	Utilities Expenses	$1,200
	Accounts Payable		$1,200

2. Cash

a	$200,000	$71,000	b
d	$13,000	$1,700	g
e	$1,500	$3,600	i
h	$1,000	$800	j
		$14,000	k
Balance	$124,400

Accounts Receivable

c)	$16,000	h)	$1,000
Balance	$15,000

Supplies

f	$3,000
Balance	$3,000

Prepaid Insurance

I)	$3,600
Balance	$3,600

Building

b)	$142,000
Balance	$142,000

Accounts Payable

g	$1,700	$3,000	f
		$1,200	i
Balance		$2,500

Deferred Revenue

		e)	$1,500
Balance			$1,500

Notes Payable (Long term)

		$71,000	b
Balance		$71,000

Common Stock

		$200,000	a
Balance		$200,000

Service Revenue

		$16,000	c
Balance		$16,000

Rent Revenue

		$13,000	d
Balance		$13,000

Utilities Expense

j	$800
i	$1,200
Balance	$2,000

Salaries and Wages Payable

k)	$14,000
Balance	$14,000

3. Spice Wood Stable Inc Unadjusted Trail Balance April 30

Cash	$124,400
Accounts Receivable	$15,000
Supplies	$3,000
Prepaid Insurance	$3,600
Building	$142,000
Accounts Payable		$2,500
Deferred Revenue		$1,500
Notes Payable		$71,000
Common stock		$200,000
Service Revenue		$16,000
Rent Revenue		$13,000
Utilities Expenses	$2,000
Salaries and Wages Payable	$14,000
Total	$304,000	$304,000

4.a) Spice wood Stable Inc. Income Statement For the Month Ended April.30

Revenues;
Service Revenue	$16,000
Rent Revenue	$13,000
Total Revenue		$29,000
Expenses;
Utilities Expenses	$2,000
Salaries and Wages Payable	$14,000
Total Expense		$16,000
Preliminary Net Income		$13,000

Net Profit Margin = Net Income / Sales = $13,000/$29,000 = 44.8%   4.b) Net Profit Margin is better then the 30 percent earned by a close competitor.Hence it is better.