Analyze the statements and prepare the eight adjusting entries a through g that
ID: 2334155 • Letter: A
Question
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 $5,400 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.
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. $ 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
Explanation / Answer
Adjusting Jounal entries
Note 1
Billing of fees earned which was unbilled earlier at the year end = $5,400 x 30% = $1,620
Account Titles and Explanation Debit Credit a. Accounts receivables [Note 1] $1,620 Fees earned $1,620 [To record accrued fees earned] Unearned fees revenue $3,780 Fees earned [$5,400 - $1,620] $3,780 [To record accrued fees earned] b Depreciation expense—Computers $1,350 Accumulated depreciation - Computers $1,350 [To record depreciation expense] c. Depreciation expense—Office furniture $1,575 Accumulated depreciation - Office furniture $1,575 [To record depreciation expense] d. Salaries expense [$14,705 - $12,500] $2,205 Salaries payable $2,205 [To record accrued salary expense] e. insurance expense $1,170 Pre-piad Insurance $1,170 {To record insurance expense] f. Office supplies expense $432 Supplies $432 [To record supplies consumed] g. Utilities expense [$1,313 - $1,250] $63 Accounts payable $63 [To record utilities expense]