Question

Following are two income statements for Alexis Co. for the year ended December 31. The left number column is prepared before any adjusting entries are recorded, and the right column includes the effects of adjusting entries. The company records cash receipts and payments related to unearned and prepaid items in balance sheet accounts. The middle column shows a blank space for each income statement effect of the eight adjusting entries a through g (the balance sheet part of the entries is not shown here).

ALEXIS CO. Income Statements For Year Ended December 31
	Unadjusted				Adjustments				Adjusted
Revenues
Fees earned	$	24,000				a.			$	30,000
Commissions earned		42,500								42,500
Total revenues	$	66,500								72,500
Expenses
Depreciation expense—Computers		0				b.				1,500
Depreciation expense—Office furniture		0				c.				1,750
Salaries expense		12,500				d.				14,950
Insurance expense		0				e.				1,300
Rent expense		4,500								4,500
Office supplies expense		0				f.				480
Advertising expense		3,000								3,000
Utilities expense		1,250				g.				1,320
Total expenses		21,250								28,800
Net income	$	45,250							$	43,700

  

Analyze the statements and prepare the eight adjusting entries a through g that likely were recorded. Note: Answer for a has two entries 30% of (i) the $6,000 adjustment for Fees Earned has been earned but not billed, and (ii) the other 70% has been earned by performing services that were paid for in advance.
  

Answer 1

Journal entries

No	Account and explanation	debit	credit
a i)	Account receivable (6000*30%)	1800
	Fees earned		1800
	(To record revenue adjusted)
a ii)	Unearned revenue (6000*70%)	4200
	Fees earned		4200
	(To record revenue adjusted)
b	Depreciation expense—Computers	1500
	Accumulated depreciation-computer		1500
	(To record dep)
c	Depreciation expense—Office furniture	1750
	Accumulated depreciation-office furniture		17500
	(To record dep)
d	Salaries expense	2450
	Salaries payable		2450
	(To record salaries)
e	Insurance expense	1300
	Prepaid insurance		1300
	(To record insurance expense)
f	Office supplies expense	480
	Office supplies		480
	(To record office supplies expense)
g	Utilities expense	70
	Utilities payable		70
	(To record utilities expense)