Question

Following are two income statements for Alexis Co. for the year ended December 31. The left 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. ALEXIS CO. Income Statements For Year Ended December 31 Unadjusted Adjusted   Revenues      Fees earned $ 24,000 $ 30,000      Commissions earned 42,500 42,500      Total revenues 66,500 72,500   Expenses      Depreciation expense—Computers 0 1,500      Depreciation expense—Office furniture 0 1,750      Salaries expense 12,500 14,950      Insurance expense 0 1,300      Rent expense 4,500 4,500      Office supplies expense 0 480      Advertising expense 3,000 3,000      Utilities expense 1,250 1,320      Total expenses 21,250 28,800   Net income $ 45,250 $ 43,700    Analyze the statements and prepare the eight adjusting entries that likely were recorded. (Note: 30% of the $6,000 adjustment for Fees Earned has been earned but not billed, and the other 70% has been earned by performing services that were paid for in advance.)

Answer 1