Question
Data regarding the adjusting entries are in the following 'adjusted trial balance' table. Green Lawns, Inc., performs adjusting entries every month, but closes its accounts
Data regarding the adjusting entries are in the following 'adjusted trial balance' table.
Green Lawns, Inc., performs adjusting entries every month, but closes its accounts only at year-end. The companys year-end adjusted trial balancedated December 31, 2015, was:
GREEN LAWNS, INC. | ||
ADJUSTED TRIAL BALANCE | ||
DECEMBER 31, 2015 | ||
Cash | $182,200 | |
Accounts receivable | 9,000 | |
Supplies | 600 | |
Equipment | 24,000 | |
Accumulated depreciation: equipment | $10,000 | |
Accounts payable | 3,000 | |
Income taxes payable | 7,000 | |
Capital stock | 50,000 | |
Retained earnings | 90,000 | |
Dividends | 4,000 | |
Lawn care revenue earned | 192,000 | |
Salary expense | 104,000 | |
Supply expense | 2,400 | |
Advertising expense | 600 | |
Depreciation expense: Equipment | 2,000 | |
Income taxes expense | 23,200 | _______ |
$352,000 | $352,000 |
GREEN LAWNS, INC. | ||
INCOME STATEMENT | ||
DECEMBER 31, 2015 | ||
Revenue | ||
Lawn care revenue | $192,000 | |
Expenses | ||
Supply expense | $2,400 | |
Salary expense | 104,000 | |
Depreciation expense: Equipment | 2,000 | |
Advertising expense | 600 | |
Total expenses | -109,000 | |
Income before tax | $83,000 | |
Less: Income tax | -23,200 | |
Net Income | $59,800 |
GREEN LAWNS, INC. | |
STATEMENT OF RETAINED EARNINGS | |
DECEMBER 31, 2015 | |
Beginning Retained Earnings | 90,000 |
Add: Net Income | 59,800 |
Subtotal | 149,800 |
Less: Dividends | 4,000 |
Ending Retained Earnings | 145,800
|
GREEN LAWNS, INC. | ||
BALANCE SHEET | ||
DECEMBER 31, 2015 | ||
Assets | ||
Cash | 182,200 | |
Accounts receivable | 9,000 | |
Supplies | 600 | |
Equipment | 24,000 | |
Less: Accumulated depreciation | -10,000 | 14,000 |
Total assets | 205,800 | |
Liabilities & Stockholders' Equity | ||
Liabilities: | ||
Accounts payable | 3,000 | |
Income taxes payable | 7,000 | |
Total liabilities | 10,000 | |
Stockholders' Equity: | ||
Capital stock | 50,000 | |
Retained earnings | 145,800 | |
Total stockholders' equity |
| 195,800 |
Total liabilities & stockholders' equity | 205,800 |
Refer to the adjusted trial balance of Green Lawns, Inc., illustrated in Exercise 5.2 to respond to the following items:
a. Prepare all necessary closing entries at December 31, 2015.
b. Prepare an after-closing trial balance dated December 31, 2015.
c. Compare the Retained Earnings balance reported in the after-closing trial balance prepared in part b to the balance reported in the adjusted trial balance. Explain why the two balances are different. (Include in your explanation why the balance reported in the after-closing trial balance has increased or decreased subsequent to the closing process.)
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