Affordable Lawn Care's income statement shows $340,000 in revenue and $27,800 in net income. Its balance sheet lists $126,650 in cash and receivables and $109,000 in liabilities. The company generated an 8.2% net profit margin and a 25.5% return on equity, showing a strong financial performance. Depending on when its $100,000 note is due, Affordable Lawn Care appears highly liquid with over $126,000 in assets to cover $9,000 in short term obligations.
Affordable Lawn Care's income statement shows $340,000 in revenue and $27,800 in net income. Its balance sheet lists $126,650 in cash and receivables and $109,000 in liabilities. The company generated an 8.2% net profit margin and a 25.5% return on equity, showing a strong financial performance. Depending on when its $100,000 note is due, Affordable Lawn Care appears highly liquid with over $126,000 in assets to cover $9,000 in short term obligations.
Affordable Lawn Care's income statement shows $340,000 in revenue and $27,800 in net income. Its balance sheet lists $126,650 in cash and receivables and $109,000 in liabilities. The company generated an 8.2% net profit margin and a 25.5% return on equity, showing a strong financial performance. Depending on when its $100,000 note is due, Affordable Lawn Care appears highly liquid with over $126,000 in assets to cover $9,000 in short term obligations.
Affordable Lawn Care's income statement shows $340,000 in revenue and $27,800 in net income. Its balance sheet lists $126,650 in cash and receivables and $109,000 in liabilities. The company generated an 8.2% net profit margin and a 25.5% return on equity, showing a strong financial performance. Depending on when its $100,000 note is due, Affordable Lawn Care appears highly liquid with over $126,000 in assets to cover $9,000 in short term obligations.
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PROBLEM 5.
2A AFFORDABLE LAWN CARE, INC. a. AFFORDABLE LAWN CARE, INC. Income Statement For the Year Ended December 31, Current Year Revenues: Mowing revenue earned $ 340,000
Statement of Retained Earnings For the Year Ended December 31, Current Year Retained earnings $ 60,000 (1/1/Current Year) Add: Net Income 27,800 Less: Dividends 10,000 Retained earnings $ 77,800 (12/31/Current Year)
Stockholders' Equity Capital stock $ 40,000 Retained earnings 77,800 Total stockholders' equity $ 117,800
Total liabilities and $ 226,800
stockholders' equity b. AFFORDABLE LAWN CARE, INC. General Journal 12/31/Current Year (1) Dec. 31 Mowing Revenue Earned 340,000 Income 340,000 To close MowingSummary Revenue Earned. (2) 31 Income Summary 312,200 Insurance 4,800 Expense Office Rent 72,000 Expense Supplies 10,400 Expense Salary 120,000 Expense Depreciation 60,000 Expense: Depreciation 8,000 Trucks Expense: Repair & 6,000 Mowing Maintenance Fuel 3,000 Equip. Expense Miscellaneo 10,000 us Expense Interest 6,000 Expense Income 12,000 Taxes To close all expense accounts. Expense (3) 31 Income Summary 27,800 Retained 27,800 To transfer netEarnings income earned in Earnings Retained Current Year to the account $27,800).($340,000 - $300,200 = (4) 31 Retained Earnings 10,000 Dividends 10,000 To transfer dividends declared in Retained Current Year Earnings to the account.
c. 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 Accounts payable 3,000 equipment 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
d. For the year ended December 31, Current Year, the company generated net income of $27,800 on $340,000 sales. Thus, net income as a percentage of sales was approximately 8.2%. Moreover, the $27,800 profit represented a return on average stockholders’ equity of approximately 25.5%, which is a fairly strong return on investment. The company’s balance sheet at December 31, Current Year, reports cash and accounts receivable totaling $126,650. It also reports various payables (liabilities) totaling $109,000. Depending on when the $100,000 note payable reported in the balance sheet is due, the company may be extremely liquid. If this obligation is not due in the near future, the company has $126,650 in cash and accounts receivable to cover obligations of only $9,000. Moreover, $1,800 of the $9,000 of obligations, the Unearned Mowing Revenue amount, will not require a cash outlay. Even if this note is due shortly, the company still appears to be liquid.
