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    Analyzing the Effects of Transactions

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    Analyze the effects of transactions using t-accounts and preparing an unadjusted trial balance. Spicewood Stables, Inc., was established in Dripping Springs, Texas, on April 1, 2007. 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 2007 are provided for your review.
    a. Received contributions from five investors of $200,000 in cash ($40,000 each).
    b. Built a barn for $142,000. The company paid half the amount in cash on April 1, 2007 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).
    f. Purchased hay and feed supplies on account for $3,210.
    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.
    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.

    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, 2007.
    4. Refer to the revenues and expenses shown on the unadjusted trial balance. Based on this information, write a short memo to the five owners offering your opinion on the results of operations during the first month of business.

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    Solution Summary

    The effects of transactions using t-accounts are analyzed and an unadjusted trial balance is prepared.