Preparing Financial Statements and Closing Entries of a Profitable Company

Affordable Lawn Care, Inc., provides lawn-mowing 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 companys 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 companys profitability and liquidity.