Spicewood Stables, Inc., was established in Dripping Springs, Texas, on April 1, 2013. The company provides stables,

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Spicewood Stables, Inc., was established in Dripping Springs, Texas, on April 1, 2013. 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 2013 are provided for your review.

a. Received contributions from five investors of $200,000 in cash ($40,000 each).

b. Built a barn and other buildings for $142,000. The company paid half the amount in cash on

April 1 and signed a three-year note payable for the balance.

c. Provided $16,000 in animal care services for customers, all on credit.

d. Rented stables to customers who cared for their own animals; received cash of $13,000.

e. Received from a customer $1,500 to board her horse in May, June, and July (record as Unearned Revenue).

f. Purchased hay and feed supplies on account for $3,000.

g. Paid $800 in cash for water utilities incurred in the month.

h. Paid $1,700 on accounts payable for previous purchases.

i. Received $1,000 from customers on accounts receivable.

j. Paid $4,000 in wages to employees who worked during the month.

k. At the end of the month, prepaid a two-year insurance policy for $3,600.

l. Received an electric utility bill for $1,200 for usage in April; the bill will be paid next month.

Required:

1. Set up appropriate T-accounts. All accounts begin with zero balances.

2. Record in the T-accounts the effects of each transaction for Spicewood Stables in April, referencing each transaction in the accounts with the transaction letter. Show the unadjusted ending balances in the T-accounts.

3. Prepare an unadjusted trial balance as of April 30, 2013.

4. Refer to the revenues and expenses shown on the unadjusted trial balance. Based on this information, calculate preliminary net income and write a short memo to the five owners offering your opinion on the results of operations during the first month of business.


Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...
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Related Book For  answer-question

Fundamentals of Financial Accounting

ISBN: 978-0078025372

4th edition

Authors: Fred Phillips, Robert Libby, Patricia Libby

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