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Problem No 5.2-A Affordable Lawn Care Inc

Affordable Lawn Care Inc. earned $340,000 in mowing revenue for the current year. After expenses totaling $300,200 which included salaries of $120,000, insurance of $4,800 and depreciation of $68,000, the company reported a net income of $27,800. The company paid dividends of $10,000 and retained the remaining $17,800 in retained earnings, bringing the total retained earnings balance to $77,800 at year-end.

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Zeeshan Ajmal
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608 views5 pages

Problem No 5.2-A Affordable Lawn Care Inc

Affordable Lawn Care Inc. earned $340,000 in mowing revenue for the current year. After expenses totaling $300,200 which included salaries of $120,000, insurance of $4,800 and depreciation of $68,000, the company reported a net income of $27,800. The company paid dividends of $10,000 and retained the remaining $17,800 in retained earnings, bringing the total retained earnings balance to $77,800 at year-end.

Uploaded by

Zeeshan Ajmal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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PROBLEM NO 5.

2-A AFFORDABLE LAWN CARE


INC.
Affordable Lawn Care inc.
Income Statement
December, 31 Current year

Revenue:
Entries Debit ($)
Mowing revenue Earned ………. $340,000

Expenses:

Entries Debits($) Credit ($)


Insurance Expense 4,800
Office Rent Expense 72,000

Supplies Expense 10,400

Salaries Expense 120,000

Depreciation Expense: Trucks 60,000

Depreciation Expense Mowing 8,000


Equipment

Repair & Maintenance 6,000

Fuel Expense 3,000

Miscellaneous Expense 10,000

Interest Expense 6,000

Income Interest 300,200

Income tax expense 39,800

Net-Income $27,800
Affordable Lawn Care inc.
Statement of Retained Earning

Retained Earnings:

Entries Debit ($) Credit ($)


Retained earning 60,000

ADD: Net-Income 27,000

Less: Dividend 10,000

Retained Earning $77,800

Affordable Lawn Care inc.


Balance Sheet
December, 31 Current year

Assets
Cash $117,050

Account receivable 9,600

Unexpired insurance 16,000

prepaid rent 6,000

Supplies 2150

Trucks $300,000

Less Accumulated 240,000

Mowing Equipment 40,000 60,000

24,000 16,000

Total Assets $226,800


Liabilities & Stockholder’s Equity
Accounts Payable $3,000

Notes Payable 100,000

Salaries payable 1,800

Interest Payable 300

Income text Payable 2,100

Unearned Mowing revenue 1,800

Total Liabilities $109,000

Stockholder’s Equity
Capital stock Retained Earning $40,000

Retained Earnings 77,800

Total stockholder’s equity $117,800

Total Liabilities + stockholder’s equity $109,000 + $117,800 = $226,800

AFFORDABLE LAWN CARE, INC.


General Journal
12/31/Current Year
(1)
Dec. Mowing Revenue Earned 340,000
31
Income Summary 340,000
To close Mowing Revenue
Earned.

(2)
Income Summary 312,200
31
Insurance 4,800
Expense
Office Rent 72,000
Expense
Supplies Expense 10,400
Salary Expense 120,000
Depreciation 60,000
Expense: Trucks
Depreciation 8,000
Expense: Mowing
Equip.
Repair & 6,000
Maintenance
Expense
Fuel Expense 3,000
Miscellaneous 10,000
Expense
Interest Expense 6,000
Income Taxes 12,000
Expense
To close all expense
accounts.

(3)
Income Summary 27,800
31
Retained 27,800
Earnings
To transfer net income
earned in Current Year to
the
Retained Earnings account
($340,000 - $300,200 =
$27,800).

(4)
Retained Earnings 10,000
31
Dividends 10,000
To transfer dividends
declared in Current Year to
the
Retained Earnings account.
AFFORDABLE LAWN CARE, INC.
After-Closing Trial Balance
December 31, Current Year
Cash $ 117,050
Accounts receivable 9,600
Unexpired insurance 16,000
Prepaid rent 6,000
Supplies 2,150
Trucks 300,000
Accumulated $ 240,000
depreciation: trucks
Mowing equipment 40,000
Accumulated 24,000
depreciation: mowing
equipment
Accounts payable 3,000
Notes payable 100,000
Salaries payable 1,800
Interest payable 300
Income taxes payable 2,100
Unearned mowing 1,800
revenue
Capital stock 40,000
Retained earnings 77,800
Totals $ 490,800 $ 490,800

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