Question

Following are two income statements for Alexis Co. for the year ended December 31. The left number column is prepared before adjusting entries are recorded, and the right column is prepared after adjusting entries. The company records cash receipts and payments related to unearned and prepaid items in balance sheet accounts.
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 seven adjusting entries that likely were recorded. Hint: Entry for a refers to fees that have been earned but not yet billed. None of the entries involve cash.

Answer 1

Answer and Explanation:

The Journal entries are shown below:-

1. Accounts receivableDr, $6,000  ($30,000 - $24,000)

           To Fees earned $6,000

(Being accrued income is recorded)

2. Depreciation expense - Computors Dr, $1,500

         To Accumulated Depreciation - Computors $1,500

(Being depreciation expenses is recorded)  

3. Depreciation expense - Office Furniture Dr, $1,750

       To Accumulated Depreciation - Office Furniture $1,750

(Being depreciation expenses is recorded)

4. Salaries expense Dr, $2,450 (14,950 - $12,500)  

     To Salaries and wages payable $2,450

(Being salaries expenses is recorded)

5. Insurance expenses Dr, $1,300

         To Prepaid insurance $1,300

(Being expired insurance is recorded)

6. Office supplies expense Dr, $480  

       To Office supplies $480

(Being office supplies expenses is recorded)

7. Utilities expenses Dr, $70 ($1,320 - $1,250)

       To Accounts payable $70

(Being utilities expenses accrued is recorded)