Ironclad Financial Group, a full-service investment advisory firm, has reached its fiscal year-end and must finalize its books by recording four adjusting entries before closing all temporary accounts to Retained Earnings.
Correct Answers
adjusted Net Income
$187,500.00
ending Retained Earnings
$262,500.00
Step-by-Step Solution
FULL ADJUSTING & CLOSING SEQUENCE Step 1 — Pre-Adjusted Income: Revenue (unadjusted): $390,000.00 Expenses (unadjusted): $205,000.00 Step 2 — Apply Adjustments: +Exp Accrue interest expense on outstanding note payable $5,000.00 +Rev Recognise the earned portion of a customer advance payment $20,000.00 +Exp Record annual depreciation on equipment $10,000.00 +Exp Record office supplies used during the period $2,500.00 Step 3 — Adjusted Totals: Adjusted Revenue: $410,000.00 Adjusted Expenses: $222,500.00 Net Income: $187,500.00 Step 4 — Compute Ending Retained Earnings: Beginning RE: $85,000.00 + Net Income: $187,500.00 − Dividends: $10,000.00 = Ending RE: $262,500.00