Question

received contributions from investors and issued $200,000 of common stock on april 1. acquired a barn for $142,000. on april 2, the company paid half the amount in cash and signed a three-year note payable for the balance. provided $16,000 in animal care services for customers on april 3, all on credit. rented stables to customers who cared for their own animals; received cash of $13,000 on april 4 for rent earned this month. on april 5, received $1,500 cash from a customer to board her horse in may, june, and july (record as deferred revenue). purchased and received hay and feed supplies on account on april 6 for $3,000. paid $1,700 on accounts payable on april 7 for previous purchases. received $1,000 from customers on april 8 on accounts receivable. on april 9, prepaid a two-year insurance policy for $3,600 for coverage starting in may. on april 28, paid $800 in cash for water and utilities used this month. paid $14,000 in wages on april 29 for work done this month. received an electric utility bill on april 30 for $1,200 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 shown on the unadjusted trial balance. based on 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.

Answer 1

Accounting profit is calculated by subtracting explicit costs from total revenues. In this case, the firm's accounting profit is $50,000.

Step-by-step explanation:

To answer this self-check question, we need to understand what accounting profit is.

Accounting profit is the total revenues of a firm minus explicit costs. In this case, the firm had sales revenue of $1 million.

It spent $600,000 on labor, $150,000 on capital, and $200,000 on materials.

So, the accounting profit is calculated as follows:

Accounting Profit = Total Revenues - Explicit Costs

= $1,000,000 - ($600,000 + $150,000 + $200,000)

= $1,000,000 - $950,000

= $50,000

Therefore, the firm's accounting profit is $50,000.