Spicewood Stables, Inc., was established in Austin, Texas, on April 1, 2003. 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 2003 are provided for your review.

a. Received contributions from five investors of $50,000 in cash ($10,000 each), a barn valued at

$100,000, land valued at $60,000, and supplies valued at $2,000. Each investor received 3,000 shares of stock.

b. Built a small barn for $42,000. The company paid half the amount in cash on April 1, 2003, and signed a three-year note payable for the balance.

c. Provided $15,260 in animal care services for customers, all on credit.

d. Rented stables to customers who cared for their own animals; received cash of $13,200.

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

/. Purchased hay and feed supplies on account for $3,210 to be used in the summer.

g. Paid $840 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.

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

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

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

m. Paid $100 cash dividend to each of the investors at the end of the 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 unadjusted financial statements at the end of April (income statement, statement of retained earnings, and balance sheet). 4. Write a short memo to the five owners offering your opinion on the results of operations during the first month of business. 5. After three years in business, you are being evaluated for a promotion to chief financial officer.

One measure is how efficiently you managed the assets of the business. The following annual data are available:

Compute the total asset turnover ratio for 2004 and 2005 and evaluate the results. Do you think you should be promoted? Why?

2005* 2004 2003 Total assets $480,000 $320,000 $300,000 Total liabilities 125,000 28,000 30,000 Total stockholders' equity 355,000 292,000 270,000 Total sales 450,000 400,000 360,000 Net income 50,000 30,000 (10,000)