adjusting and closing · full sequence
Today’s Expert Challenge
Keystone Partners Corp., a mid-sized management consulting firm, has reached year-end and must process four accrual-based adjusting entries before closing its books, starting from pre-adjusted revenue of $195,000 and expenses of $200,000 against a beginning retained earnings balance of $65,000.
Apply all adjustments, compute adjusted net income, and calculate ending Retained Earnings.
Pre-Adjusted Revenue
$195,000
Pre-Adjusted Expenses
$200,000
Accrue interest expense on outstanding note payable
$2,000 (increases expenses)
Recognise the earned portion of a customer advance payment
$10,000 (increases revenue)
Record annual depreciation on equipment
$15,000 (increases expenses)
Record office supplies used during the period
$7,500 (increases expenses)
Beginning Retained Earnings
$65,000
Dividends Declared
$5,000
No account needed — this check is free for everyone.
Need a hint?
- Calculate adjusted net income by incorporating all four adjustments into both revenue and expenses before subtracting total expenses from total revenue.
- Compute ending retained earnings by adding adjusted net income (or subtracting a net loss) to the $65,000 beginning balance, then deducting the $5,000 in dividends declared.
2026-09-08