Garden Wizards provides gardening services to both commercial and residential customers. The company performs adjusting entries on a monthly basis, whereas closing entries are prepared annually at December 31. An adjusted trial balance dated December 31, 2011, follows.

Instructions

a. Prepare an income statement and statement of retained earnings for the year ended December 31, 2011. Also prepare the company’s balance sheet dated December 31, 2011.

b. Prepare the necessary year-end closing entries.

c. Prepare an after-closing trial balance.

d. Using the financial statements prepared in part a, briefly evaluate the company’s profitability andliquidity.

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GARDEN WIZARDS ADJUSTED TRIAL BALANCE DECEMBER 31, 2011 Debits Credits Cash Accounts receivable Unexpired insurance. Prepaid rent Supplies Trucks Accumulated depreciation: trucks... Equipment Accumulated depreciation: equipment Accounts payable. Notes payable... 27,800 4,300 8,700 3,200 1,400 . - 140,000 75,000 28,000 14,000 2,200 38,000 900 300 1,700 2,000 18,000 21,000 Interest payable Income taxes payable. . Unearned service revenue .. Capital stock Retained earnings Dividends Service revenue earned Insurance expense. .. . Office rent expense . Supplies expense . . . . Salary expense. . Depreciation expense: trucks Depreciation expense: equipment. Repair and maintenance expense Fuel expense Miscellaneous expense Interest expense .- . . Income taxes expense 3,300 194,000 1,800 28,000 5,600 72,000 16,000 4,000 5,300 2,200 2,700 3,800 9,000 $367,100 $367,100