Keystone Partners Corp., a mid-sized management consulting firm, has reached its fiscal year-end and must finalize four accrual-based adjustments before closing its books and reporting equity to stakeholders.
Correct Answers
adjusted Net Income
$41,500.00
ending Retained Earnings
$96,500.00
Step-by-Step Solution
FULL ADJUSTING & CLOSING SEQUENCE Step 1 — Pre-Adjusted Income: Revenue (unadjusted): $180,000.00 Expenses (unadjusted): $130,000.00 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 $10,000.00 +Exp Record annual depreciation on equipment $15,000.00 +Exp Record office supplies used during the period $2,500.00 Step 3 — Adjusted Totals: Adjusted Revenue: $190,000.00 Adjusted Expenses: $148,500.00 Net Income: $41,500.00 Step 4 — Compute Ending Retained Earnings: Beginning RE: $60,000.00 + Net Income: $41,500.00 − Dividends: $5,000.00 = Ending RE: $96,500.00