Question

Revenue). 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 $170,000 of common stock on April 1. b. Acquired a barn for $233,000. On April 2, the company paid half the amount in cash and signed a three-year note payable for the balance. c. Provided $18,500 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 $17,000 on April 4 for rent earned this month. e. On April 5, received $3,650 cash from a customer to board her horse in May, June, and July (record as Deferred Purchased and received hay and feed supplies on account on April 6 for $4,400. g. Paid $3,140 on accounts payable on April 7 for previous purchases. h. Received $1,340 from customers on April 8 on accounts receivable. i. On April 9, prepaid a two-year insurance policy $5,000 for coverage starting in May. j. On April 28, paid $1,700 in cash for water and utilities used this month. k. Paid $14,300 in wages on April 29 for work done this month. 1. Received an electric utility bill on April 30 for $2,120 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 show on the unadjusted trial balance. Based 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. Req 1 Req 2 Req 3 Req 4A Req 4B Prepare an unadjusted trial balance as of April 30. SPICEWOOD STABLES, INC. Unadjusted Trial Balance Debit Credit Cash Accounts Receivable Supplies Prepaid Insurance Buildings Accounts Payable Deferred Revenue Notes Payable (long-term) Common Stock Service Revenue Rent Revenue Utilities Expense Salaries and Wages Expense Total $ 0 $ 0

Answer 1

Spicewood Stables, Inc. Journal Enteries Trans. Particulars a. Cash a/c Dr. To Common Stock (Common stock issued) Debit in $ Credit in $ 170000 170000 Debit in $ Credit in $ 51350 17160 5000 b. 233000 4400 233000 Building a/c Dr. To Cash To Note Payable (Barn purchased) 116500 116500 Unadjusted Trial Balance For the Month ending April 30 Particulars Cash Accounts Receivable Prepaid Insurance Supplies Building Accounts Payable Deferred Revenue Note Payable Common Stock Service Revenue Rent Revenue Utilities Expense Wages Expense Totals 3380 3650 116500 170000 18500 17000 C. 18500 Accounts Receivable a/c Dr. To Service Revenue (Services provided on account) 18500 d. 17000 Cash a/c Dr. To Rent Revenue (Rent earned) 3820 14300 329030 17000 329030 e. 3650 Cash a/c Dr. To Deferred Revenue (Advance from client) 3650 Statement of Income For the Month ending April 30 Service Revenue Rent Revenue Total Revenues Less: Utilities Expense Wages Expense Preliminary Net Income 18500 17000 35500 f. 4400 Supplies a/c Dr. To Accounts Payable (Supplies on account) 4400 3820 14300 18120 17380 3140 Accounts Payable a/c Dr. To Cash (Creditors paid) 3140 Net Profit Margin = Net Income / Total Revenue = 17380 / 35500 = 48.96% h. 1340 Cash a/c Dr. To Accounts Receivable (Cash from debtors) 1340 i. 5000 Prepaid Insurance a/c Dr. To Cash (two year insurance paid) 5000 j. Dr. 1700 Utilities Expense a/c To Cash (Water bill paid) 1700 k. Dr. 14300 Wages Expense a/c To Cash (Wages paid) 14300 1. 2120 Utilities Expense a/c Dr. To Accounts payable (Electricity expense on account) 2120

Cash Common Stock 170000 b. a. 170000 a. d. 116500 3140 5000 17000 3650 Bal. 170000 170000 i. 170000 1340 1700 j. k. Bal. 14300 Service Revenue C. 18500 51350 191990 191990 Bal. 18500 18500 18500 C. Accounts Receivable 18500) h. Bal. 1340 17160 17000 Rent Revenue d. 17000 17000 18500 18500 Bal. 17000 Prepaid Insurance 5000 Bal. 5000 j. I. Utilities Expense 1700 2120 Bal. 3820 5000 5000 3820 3820 f. Supplies 4400 Bal. 4400 Wages Expense 14300 4400 k. 4400 Bal. 14300 14300 14300 b. Building 233000 Bal. 2330001 233000 233000 Accounts Payable 3140 f. 1. 4400 2120 Bal. 3380 6520 6520 Deferred Revenue e. 3650 Bal. 3650 3650 3650 Note Payable b. 116500 Bal. 116500 116500 116500