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.

Exercise 3-5 Analyzing and preparing adjusting entries LO P1, P3

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).



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 $4,800 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.



Explanation

a1.
To record earned but unbilled fees.
Fees earned = (30% × $4,800) = $1,440
 
a2.
To record earned fees collected in advance.
Fees earned = (70% × $4,800) = $3,360