Horizon Capital Corp., a mid-sized investment holding company, reaches its December 31 fiscal year-end requiring four accrual-based adjustments to its preliminary revenue of $210,000 and expenses of $190,000 before closing entries can update retained earnings.
Correct Answers
adjusted Net Income
$10,500.00
ending Retained Earnings
$100,500.00
Step-by-Step Solution
FULL ADJUSTING & CLOSING SEQUENCE Step 1 — Pre-Adjusted Income: Revenue (unadjusted): $210,000.00 Expenses (unadjusted): $190,000.00 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 $5,000.00 +Exp Record office supplies used during the period $7,500.00 Step 3 — Adjusted Totals: Adjusted Revenue: $215,000.00 Adjusted Expenses: $204,500.00 Net Income: $10,500.00 Step 4 — Compute Ending Retained Earnings: Beginning RE: $95,000.00 + Net Income: $10,500.00 − Dividends: $5,000.00 = Ending RE: $100,500.00