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Item 3

Item 3 6 points Item Skipped

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 Adjusted Revenues Fees earned $ 18,000 $ 25,000 Commissions earned 36,500 36,500 Total revenues $ 54,500 61,500 Expenses Depreciation expenseComputers 0 1,600 Depreciation expenseOffice furniture 0 1,850 Salaries expense 13,500 15,750 Insurance expense 0 1,400 Rent expense 3,800 3,800 Office supplies expense 0 580 Advertising expense 2,500 2,500 Utilities expense 1,245 1,335 Total expenses 21,045 28,815 Net income $ 33,455 $ 32,685

Analyze the statements and prepare the eight adjusting entries that likely were recorded. (Note: For the $7,000 adjustment for Fees Earned, 30% (or $2,100) has been earned but not billed, and the other 70% (or $4,900) has been earned by performing services that were paid for in advance.)