Apex Global Advisors, a boutique management consulting firm, has reached year-end and must process four accrual-based adjusting entries before closing its temporary accounts to finalize retained earnings for the period.
Correct Answers
adjusted Net Income
$63,000.00
ending Retained Earnings
$93,000.00
Step-by-Step Solution
FULL ADJUSTING & CLOSING SEQUENCE Step 1 — Pre-Adjusted Income: Revenue (unadjusted): $165,000.00 Expenses (unadjusted): $95,000.00 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 $15,000.00 +Exp Record annual depreciation on equipment $15,000.00 +Exp Record office supplies used during the period $5,000.00 Step 3 — Adjusted Totals: Adjusted Revenue: $180,000.00 Adjusted Expenses: $117,000.00 Net Income: $63,000.00 Step 4 — Compute Ending Retained Earnings: Beginning RE: $35,000.00 + Net Income: $63,000.00 − Dividends: $5,000.00 = Ending RE: $93,000.00