Harborview Financial Corp., a regional lending and investment advisory firm, has reached year-end and must process four accrual-based adjustments to its preliminary figures before closing all temporary accounts into retained earnings.
Correct Answers
adjusted Net Income
$224,000.00
ending Retained Earnings
$339,000.00
Step-by-Step Solution
FULL ADJUSTING & CLOSING SEQUENCE Step 1 — Pre-Adjusted Income: Revenue (unadjusted): $345,000.00 Expenses (unadjusted): $115,000.00 Step 2 — Apply Adjustments: +Exp Accrue interest expense on outstanding note payable $1,000.00 +Rev Recognise the earned portion of a customer advance payment $20,000.00 +Exp Record annual depreciation on equipment $20,000.00 +Exp Record office supplies used during the period $5,000.00 Step 3 — Adjusted Totals: Adjusted Revenue: $365,000.00 Adjusted Expenses: $141,000.00 Net Income: $224,000.00 Step 4 — Compute Ending Retained Earnings: Beginning RE: $125,000.00 + Net Income: $224,000.00 − Dividends: $10,000.00 = Ending RE: $339,000.00