Horizon Capital Corp., a mid-sized investment holding company, has reached its fiscal year-end and must apply four accrual-based adjustments to its pre-adjusted revenue of $280,000 and expenses of $80,000 before closing all temporary accounts to Retained Earnings.
Correct Answers
adjusted Net Income
$195,500.00
ending Retained Earnings
$235,500.00
Step-by-Step Solution
FULL ADJUSTING & CLOSING SEQUENCE Step 1 — Pre-Adjusted Income: Revenue (unadjusted): $280,000.00 Expenses (unadjusted): $80,000.00 Step 2 — Apply Adjustments: +Exp Accrue interest expense on outstanding note payable $2,000.00 +Rev Recognise the earned portion of a customer advance payment $10,000.00 +Exp Record annual depreciation on equipment $5,000.00 +Exp Record office supplies used during the period $7,500.00 Step 3 — Adjusted Totals: Adjusted Revenue: $290,000.00 Adjusted Expenses: $94,500.00 Net Income: $195,500.00 Step 4 — Compute Ending Retained Earnings: Beginning RE: $75,000.00 + Net Income: $195,500.00 − Dividends: $35,000.00 = Ending RE: $235,500.00