Problem 5.2A (Static) Preparing Financial Statements and Closing Entries of a Profitable Company (LO 5-1, LO 5-2, LO 5-4, LO 5-5, LO 5-6)

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, current year, follows. AFFORDABLE LAWN CARE, INC. Adjusted Trial Balance December 31, Current Year Credits Debits $ 117,050 9,600 16,000 6,000 2,150 300,000 $ 240,000 40,000 Cash Accounts receivable Unexpired insurance Prepaid rent Supplies Trucks Accumulated depreciation: trucks Mowing equipment Accumulated depreciation: mowing equipment Accounts payable Notes payable Salaries payable Interest payable Income taxes payable Unearned mowing revenue Capital stock Retained earnings Dividends Mowing revenue earned Insurance expense Office rent expense Supplies expense Salary expense Depreciation expense: trucks Depreciation expense: mowing equipment Repair and maintenance expense Fuel expense Miscellaneous expense Interest expense Income taxes expense 24,000 3,000 100,000 1,800 300 2,100 1,800 40,000 60,000 10,000 340,000 4,800 72,000 10,400 120,000 60,000 8,000 6,000 3,000 10,000 6,000 12,000 $ 813,000 $ 813,000 Required: a-1. Prepare an income statement for the year ended December 31, current year. a-2. Prepare a statement of retained earnings for the year ended December 31, current year. a-3. Prepare the company's balance sheet dated December 31, current year. 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. AFFORDABLE LAWN CARE, INC. Balance Sheet December 31, Current Year Assets Cash $ 117,050 9,600 16,000 Accounts receivable Unexpired insurance Prepaid rent Supplies Trucks 6,000 2,150 $ 300,000 60,000 x 360,000 Depreciation expense: trucks Mowing equipment 16,000 x 24,000 40,000 550,800 Total assets Liabilities $ 3,000 100,000 1,800 Accounts payable Notes payable Salaries payable Interest payable Income taxes payable Unearned mowing revenue 300 2,100 1,800 Total liabilities $ 109,000 Stockholders' equity 0 Total stockholders' equity Total liabilities and stockholders' equity $ 109,000