Exercise 5.

2
a.
Green Lawns, INC
Income Statement
For the year ending Dec 31, 2021

Revenues:
Lawn Care revenue earned $ 230,400
Expenses:
Salary Expense $ 124,800
Supply Expense $ 2,880
Advertising expense $ 720
Depriciacion expense equipment $ 2,400
Income tax expense $ 27,840
(Less) total expenses $ (158,640)
Net income $ 71,760

Green Lawns, INC

Statement of retained earnings
For the year ending Dec 31, 2021
Beginning retained earnings $ 108,000
Add: Net income $ 71,760
Sub total $ 179,760
Less Dividends $ (4,800)
Ending retained earnings $ 174,960

Green Lawns, INC

Balance Sheet
As of Dec 31, 2021
Assets Amount Liabilities & Stockholder's equity
Cash $ 218,640 Liabilities
Accounts receivable $ 10,800 Accounts payable
Supplies $ 720 Income tax payable
Equipment $ 28,800 Total Liabilities
Less: Accumulated Depriciation $ (12,000) $ 16,800
Total Assets $ 246,960 Stockholder's equity
Capital stock
Retained earnings
Total stockholders equity
Total liabilities and stockholder's equity

b.
Looking at the current asset ratio of Green Lawns, Inc, the company appears to be liquid, it has assets equal to $246,960 and l
equal to $12,000. By calculating that $246,960(total assets)/$12,000(total liabilities) = 19.18:1. The company has 19.18 times
current total assets to meet its short-term obligation
Looking at the current asset ratio of Green Lawns, Inc, the company appears to be liquid, it has assets equal to $246,960 and l
equal to $12,000. By calculating that $246,960(total assets)/$12,000(total liabilities) = 19.18:1. The company has 19.18 times
current total assets to meet its short-term obligation

c.
By looking at retained earnings in the beginning of the year, Green Lawn, Inc has been profitable in the past. After all expenses
dividends were paid out, the company still had $108,000 in retained earnings.
der's equity Amount

$ 3,600
$ 8,400
$ 12,000

$ 60,000
$ 174,960
quity $ 234,960
tockholder's equity $ 246,960

sets equal to $246,960 and liabilities

e company has 19.18 times more
n the past. After all expenses and
 Internet Consulting Service, INC.
Worksheet
Ended December 31, 2021
Trial balance Adjustments Adjustment Trial Balance
Debit Credit Debit Credit Debit
Balance Sheet Accounts:
Cash 49,100 49,100
Consulting fees receivable 23,400 (7) 11,000 34,400
Prepaid office rent 6,300 (1) 2100 4,200
Prepaid dues and subscriptions 300 (2) 50 250
Supplies 600 (3) 150 450
Equipment 36,000 36,000
Accumulated Depr: Equipment 10,200 (4) 600
Notes Payable 5,000
Income Tax Payable 12,000 (9) 5,000
Unearned Consulting Fees 5,950 (6) 2,850
Capital Stock 30,000
Retained Earnings 32,700
Dividends 60,000 60,000
Salaries Payable (8) 1,700
Interest Payable (5) 100

Income Statement Accounts:

Consulting fees earned 257,180 (6) 2,850
(7) 11,000
Salaries Expense 88,820 (8) 1,700 90,520
Telephone Expense 2,550 2,550
Rent Expense 22,000 (1) 2,100 24,100
Income Taxes expense 51,000 (9) 5,000 56,000
Dues and subsriptions expense 560 (2) 50 610
Supplies Expense 1,600 (3) 150 1,750
Depriciation Expense: Equipment 6,600 (4) 600 7,200
Misc. Expenses 4,200 4,200
353,030 353,030
Interest Expense (5) 100 100
23,550 23,550 371,430
Net Income
Total

Adjustments:
1. December rent expense .
2.December dues and subscriptions expese.
3.December supplies use. ($600-$450).
4.Depriciacion expense ($36,000/60 mos.).
5.Accrued interest on notes payable.
6. Consulting services -paid in advance
7.Services rendered but not billed
8.Salaries earned but not paid
9.Estimated income taxes expense
vice, INC.

, 2021
Adjustment Trial Balance Income Statement Balance Sheet
Credit Debit Credit Debit Credit

49,100
34,400
4,200
250
450
36,000
10,800 10,800
5,000 5,000
17,000 17,000
3,100 3,100
30,000 30,000
32,700 32,700
60,000
1,700 1,700
100 100

271,030 271,030

90,520
2,550
24,100
56,000
610
1,750
7,200
4,200

100
371,430 187,030 271,030 184,400 100,400
84,000 84,000
271,030 271,030 184,400 184,400