Vanguard Financial Services, a mid-sized investment advisory firm, has reached year-end and must process four accrual-based adjustments to its pre-adjusted revenue of $320,000 and expenses of $215,000 before closing its books to determine the final retained earnings balance.
Correct Answers
adjusted Net Income
$90,500.00
ending Retained Earnings
$200,500.00
Step-by-Step Solution
FULL ADJUSTING & CLOSING SEQUENCE Step 1 — Pre-Adjusted Income: Revenue (unadjusted): $320,000.00 Expenses (unadjusted): $215,000.00 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 $5,000.00 +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: $325,000.00 Adjusted Expenses: $234,500.00 Net Income: $90,500.00 Step 4 — Compute Ending Retained Earnings: Beginning RE: $115,000.00 + Net Income: $90,500.00 − Dividends: $5,000.00 = Ending RE: $200,500.00