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, 2015, follows.

Instructions

a. Prepare an income statement and statement of retained earnings for the year ended December 31, 2015. Also prepare the company’s balance sheet dated December 31, 2015.

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 and liquidity.

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GARDEN WIZARDS ADJUSTED TRIAL BALANCE DECEMBER 3I, 2015 Credits Debits $ 27,800 Cash.... Accounts receivable. 4,300 Unexpired insurance 8,700 3,200 Prepaid rent . Supplies... 1,400 Trucks... 140,000 $ 75,000 Accumulated depreciation: trucks . Equipment ..... Accumulated depreciation: equipment 28,000 14,000 Accounts payable... 2,200 38,000 Notes payable Salaries payable.. 900 Interest payable 300 Income taxes payable 1,700 Unearned service revenue 2,000 Capital stock .... 18,000 Retained earnings 21,000 Dividends... 3,300 Service revenue earned 194,000 Insurance expense. 1,800 Office rent expense 28,000 Supplies expense. Salary expense.. 5,600 72,000 Depreciation expense: trucks.. 16,000 Depreciation expense: equipment . Repair and maintenance expense Fuel expense 4,000 5,300 2,200 ..... Miscellaneous expense 2,700 Interest expense.. 3,800 Income taxes expense 9,000 $367,100 $367,100