Meridian Capital Group, a mid-sized investment advisory firm, has reached its fiscal year-end and must record four adjusting entries to bring revenues and expenses to their correct accrual-basis totals before closing its temporary accounts to retained earnings.
Correct Answers
adjusted Net Income
$65,500.00
ending Retained Earnings
$125,500.00
Step-by-Step Solution
FULL ADJUSTING & CLOSING SEQUENCE Step 1 — Pre-Adjusted Income: Revenue (unadjusted): $185,000.00 Expenses (unadjusted): $115,000.00 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 $20,000.00 +Exp Record annual depreciation on equipment $15,000.00 +Exp Record office supplies used during the period $7,500.00 Step 3 — Adjusted Totals: Adjusted Revenue: $205,000.00 Adjusted Expenses: $139,500.00 Net Income: $65,500.00 Step 4 — Compute Ending Retained Earnings: Beginning RE: $70,000.00 + Net Income: $65,500.00 − Dividends: $10,000.00 = Ending RE: $125,500.00