Problem -
Affordable Lawn Care , Inc., provides laws-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.
AFFORDABLE LAWN CARE, INC.
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2015
Cash Debits$117,050
Accounts receivable Debit 9,600
unexpired insurance debits 16,000
prepaid rent debits 6,000
supplies debits 2,150
trucks debits 300,000
accumulated depreciation:trucks credit $240,000
mowing equipment debit 40,000
accumulated depreciation:mowing equipment credit 24,000
accounts payable credit 3,000
notes payable credit 100,000
salaries payable credit 1,800
interest payable credit 300
income taxes payable credit 2,100
unearned mowing revenue credit 1,800
capital stock credit 40,000
retained earnings credit 60,000
dividends debit 10,000
mowing revenue earned credit 340,000
insurance expense debit 4,800
office rent expense debit 72,000
supplies expense debit 10,400
salary expense debit 120,000
depreciation expense: trucks debit 60,000
depreciation expense: mowing equipment debit 8,000
repair and maintenance expense debit 6,000
fuel expense debit 3,000
miscellaneous expense debit 10,000
interest expense debit 6,000
income taxes expense 12,000
debits $813,000 credits $813,00
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. Using the financial statement prepared in part a, briefly evaluate the company's profitability and liquidity.