Apex Global Advisors, a boutique management consulting firm, has reached its fiscal year-end and must record four accrual-based adjusting entries before closing its temporary accounts to finalize retained earnings.
Correct Answers
adjusted Net Income
$74,000.00
ending Retained Earnings
$189,000.00
Step-by-Step Solution
FULL ADJUSTING & CLOSING SEQUENCE Step 1 — Pre-Adjusted Income: Revenue (unadjusted): $275,000.00 Expenses (unadjusted): $210,000.00 Step 2 — Apply Adjustments: +Exp Accrue interest expense on outstanding note payable $1,000.00 +Rev Recognise the earned portion of a customer advance payment $20,000.00 +Exp Record annual depreciation on equipment $5,000.00 +Exp Record office supplies used during the period $5,000.00 Step 3 — Adjusted Totals: Adjusted Revenue: $295,000.00 Adjusted Expenses: $221,000.00 Net Income: $74,000.00 Step 4 — Compute Ending Retained Earnings: Beginning RE: $120,000.00 + Net Income: $74,000.00 − Dividends: $5,000.00 = Ending RE: $189,000.00