Question

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 $330,000 of common stock on April 1. b. Acquired a barn for $165,000. On April 2, the company paid half the amount in cash and signed a three-year note payable for the balance. c. Provided $24,900 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 $11,500 on April 4 for rent earned this month. e. On April 5, received $3,900 cash from a customer to board her horse in May, June, and July (record as Deferred Revenue). 4 Purchased and received hay and feed supplies on account on April 6 for $4,700. g. Paid $2,860 on accounts payable on April 7 for previous purchases. h. Received $1,240 from customers on April 8 on accounts receivable. 1. On April 9, prepaid a two-year insurance policy for $5,700 for coverage starting in May. ). On April 28, paid $960 in cash for water and utilities used this month. k. Paid $15,800 in wages on April 29 for work done this month. 1. Received an electric utility bill on April 30 for $1,940 for usage in April; the bill will be paid next month.

Answer 1

1. Preliminary Net Income = $17,700

Explanation;  

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

Revenues;
Service Revenue	$24,900
Rent Revenue	$11,500
Total Revenue		$36,400
Expenses;
Utilities Expenses ($960+1,940)	$2,900
Salaries and Wages Expense	$15,800
Total Expenses		$18,700
Preliminary Net Income		$17,700

2. Net Profit Margin = $17,700/ $36,400 = 48.6% 3. Net Profit Margin is Better than the 30 % earned by a close competitor.