Following are two income statements for Javelin Company for the month ended December 31, 2014. Column B was prepared before any adjusting entries were recorded and column D includes the effects of adjusting entries. The company records cash receipts and disbursements related to unearned and prepaid items in balance sheet accounts. Analyze the statements and prepare the adjusting entries that must have been recorded. (Of the $12,000 increase in Fees earned, 30% represents additional fees earned but not billed. The other 70% was earned by performing services that the customers had paid for in advance.)

Analysis Component: Identify and explain which GAAP requires that adjusting entries be recorded. By how much would revenues, expenses, and net income be overstated / understated if adjustments were not recorded at December 31, 2014, for Javelin Company?

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Javelin Company Income Statements.xls Home treet Page Layout Formues Dt Revie vew P18 Javelin Company Income Statements For Month Ended December 31, 2014 Before After Adjustments Adjustments Adjustments 6 Revenues: 5 60,000 85,000 $145,000 Fees earned 5 48,000 85,000 133,000 8 Commissions earned 9 Total revenues 10 Operating expenses: 11 Depreciation expense, computers 12 Depreciation expense, office furniture 13 Salaries expense 14 Insurance expense 15 Rent expense 16 Office supplies expense 17 Advertising expense 18 Utilities expense 19 Total operating expenses 20 Net Income 3,000 3,500 29,900 2,600 9,000 960 6,000 2,640 57,600 $ 87.400 S 0. 25,000 9,000 6,000 2,500 5 42.500 $ 90,500