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.

ALEXIS CO. Income Statements For Year Ended December 31
	Unadjusted				Adjustments				Adjusted
Revenues
Fees earned	$	24,000				a.			$	29,400
Commissions earned		42,500								42,500
Total revenues	$	66,500								71,900
Expenses
Depreciation expense—Computers		0				b.				1,350
Depreciation expense—Office furniture		0				c.				1,575
Salaries expense		12,500				d.				14,705
Insurance expense		0				e.				1,170
Rent expense		4,500								4,500
Office supplies expense		0				f.				432
Advertising expense		3,000								3,000
Utilities expense		1,250				g.				1,313
Total expenses		21,250								28,045
Net income	$	45,250							$	43,855

  

Analyze the statements and prepare the seven adjusting entries a through g that likely were recorded. Note: Entry for a refers to fees that have been earned but not yet billed.
  

Answer 1

Journal entry

No	Account and explanation	Debit	Credit
a	Account receivable	5400
	Fees earned		5400
b	Depreciation expense—Computers	1350
	Accumulated depreciation-Computers		1350
c	Depreciation expense—Office furniture	1575
	Accumulated depreciation-Office furniture		1575
d	Salaries expense	2205
	Salaries payable		2205
e	Insurance expense	1170
	Prepaid insurance		1170
f	Office supplies expense	432
	Office supplies		432
g	utilities expense	63
	Utilities payable		63