Chapter 4, Problem 4.18E

Exercise 4.18

LO 6, 7

Effects of adjustments A bookkeeper prepared the year-end financial statements of Giftwrap, Inc. The income statement showed net income of $118,000, and the balance sheet showed ending retained earnings of $455,000. The firm’s accountant reviewed the bookkeeper’s work and determined that adjustments should be made that would increase revenues by $25,000 and increase expenses by $42,000.

Required:

Calculate the amounts of net income and retained earnings after the preceding adjustments are recorded.