Reference no: EM131570651

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.