Question

Chapter 5 Homework Saved Help Save & Exit Submi Check my work 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, Tollow eBook References Credits $ 240,000 24,000 3,000 100,000 1,800 AFFORDABLE LAWN CARE, INC. Adjusted Trial Balance December 31, Current Year Debits Cash $ 117,050 Accounts receivable 9,600 Unexpired insurance 16,000 Prepaid rent 6,000 Supplies 2,150 Trucks 300,000 Accumulated depreciation. trucks Mowing equipment 40,000 Accumulated depreciation: mowing equipment Accounts payable Notes payable Salaries payable Interest payable Income taxes payable Unearned moving revenue Capital stock Retained earnings Dividends 10,000 Moving revenue earned Insurance expense 4,800 office rent expense 72.000 Supplies expense 10,400 Salary expense 120,000 Depreciation expensei trucks 60,000 Depreciation expense: nowing equipment 8,000 Repair and maintenance expense 6,000 Fuel expense 3.000 Miscellaneous expense 10,000 Joo 2,100 1,800 40,000 60,000 340,000 3 of 4 !! Next

Answer 1

Answer to Question a 1					Answer to Question a 3
Income statement for the year ended December 31					Balance sheet as on December 31
					Assets	Amount
Particulars	Amount (in$)				Cash	117,050
Mowing revenue earned	340,000				Accounts receivable	9,600
Total Revenue	340,000				Unexpired insurance	16,000
Less:					Prepaid rent	6,000
Insurance expense	4,800				Supplies	2,150
Office rent expense	72,000				Trucks	300,000
Supplies expense	10,400				Less: Accumulated depreciation	(240,000)
Salary expense	120,000				Mowing equipment	40,000
Depreciation expense : Trucks	60,000				Less: Accumulated depreciation	(24,000)
Depreciation expense : Mowing trucks	8,000				Total	226,800
Repair and maintainance expense	6,000
Fuel expense	3,000				Liabilities	Amount
Miscellaneous expense	10,000				Accounts payable	3000
Interest expense	6,000				Notes payable	100000
	300200				Salaries payable	1800
Income before tax	39,800				Interest payable	300
Less: Income taxes	12,000				Income tax payable	2100
Income after tax	27,800				Unearned mowing revenue	1800
					Total Liabilities	109000
					Stock holder's equity
Answer to Question a 2					Capital stock	40000
Statement of retained earnings					Retianed earnings	77800
Beginnning balance of retained earnings	60000				Total stock holder's equity	117800
Add:
Net income for the year	27800					-
Total	87800
Less: Dividend paid	10000
Closing balance	77800				Answer to Question b
					Year -end closing entries	Debit	Credit
Answer to Question C
After closing entries trial balance				1)	Mowing revenue earned	340000
	Debit	Credit			To Income summary		340000
Cash	117,050
Accounts receivable	9,600
Unexpired insurance	16,000			2)	Income summary	312,200
Prepaid rent	6,000				To Insurance expense		4,800
Supplies	2,150				To Office rent expense		72,000
Trucks	300,000				To Supplies expense		10,400
Less: Accumulated depreciation		240000			To Salary expense		120,000
Mowing equipment	40,000				To Depreciation expense : Trucks		60,000
Less: Accumulated depreciation		24000			To Depreciation expense : Mowing trucks		8,000
Accounts payable		3000			To Repair and maintainance expense		6,000
Notes payable		100000			To Fuel expense		3,000
Salaries payable		1800			To Miscellaneous expense		10,000
Interest payable		300			To Interest expense		6,000
Income tax payable		2100			To Income tax expense		12,000
Unearned mowing revenue		1800
Reatined earnings		77800
Capital stock		40000		3)	Net income	27800
Total	490,800	490,800			To retained earnings		27800
				4)	Retained earnings	10000
					To Dividend paid		10000
Answer to Question d
To evaluate Company's profitability and Liquidity, we calculate some ratio
For Profitability
1) Net profit ratio = Net profit or income/ sales
27800/340000 = 8%
For Liquidity
1) Current ratio = Current assets/ Current liabilities
150800/109000 = 1.38
2) Acid ratio or Liquid ratio = All current assets - Prepaid expense - Stock/ Current liabilities
(150800- 16000-60000)/109000 = 1.18