Financial Statement Preparation Green Lawns, Inc., performs adjusting entries ev

Question

Financial Statement Preparation
Green Lawns, Inc., performs adjusting entries every month, but closes its accounts only at year-end. The company’s year-end adjusted trial balance dated December 31, 2015, was

Preparing Closing Entries and an After-Closing Trial Balance
Refer to the adjusted trial balance of Green Lawns, Inc., illustrated in Exercise 5.2 to respond to the following items:
a.Prepare all necessary closing entries at December 31, 2015.
b.Prepare an after-closing trial balance dated December 31, 2015.
c.Compare the Retained Earnings balance reported in the after-closing trial balance prepared in part b to the balance reported in the adjusted trial balance. Explain why the two balances are different. (Include in your explanation why the balance reported in the after-closing trial balance has increased or decreased subsequent to the closing process.)

123 Windows Picture and Fax Viewer GREEN LAWNS, INC. ADJUSTED TRIAL BALANCE DECEMBER 31, 2015 182,200 9 Cash . . Supplies. Equipment . 24,000 10,000 Income taxes payable Capital stock 7,000 50,000 90,000 Dividends . . .. Lawn care revenue earned ....._... . 4,000 . .. . . . .. 192,000 104,000 2,400 2,000 23,200 352,000 $352,000 start Bookshelf | Financial Financial Statement P 5 Microsoft Office 3 Microsoft Office E. 123-Paint 123-windows Pictur il 9:00 AM

Explanation / Answer

Off-balance-sheet activities are contingent commitments to undertake future on-balance-sheet investments. The usual benefit of committing to a future activity is the generation of immediate fee income without the normal recognition of the activity on the balance sheet. As such, these contingent investments may be exposed to credit risk (if there is some default risk probability), interest rate risk (if there is some price and/or interest rate sensitivity) and foreign exchange rate risk (if there is a cross currency commitment).  

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