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A bookkeeper prepared the year-end financial statements of Giftwrap, Inc. The income statement showed net income of $22,300, and the balance sheet showed ending retained earnings of $90,500. The firm's accountant reviewed the bookkeeper's work and determined that adjustments should be made that would increase revenues by $5,900 and increase expenses by $8,800.
Required:
Calculate the amounts of net income and retained earnings after the preceding adjustments are recorded.

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ayokenny2001

Answer:

• Net income $19,400

• Retained earnings $87,600

Explanation:

With regards to the above,

Net income before adjustments

$22,300

Add: Increase in revenue

$5,900

Less: Increase in expenses

($8,800)

Net income after adjustment

$19,400

Retained earnings before adjustment

$90,500

Less: Decrease in net income ($22,300 - $19,400)

($2,900)

Retained earnings after adjustment

$87,600

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