Chapter three Need-to-Know Videos

Classify the following adjusting entries as involving prepaid expenses, unearned revenues, accrued expenses, or accrued revenues.

a.To record revenue earned that was previously received as cash in advance.Unearned revenuesselected answer correctb.To record wages expense incurred but not yet paid (nor recorded).Accrued expensesselected answer correctc.To record revenue earned but not yet billed (nor recorded).Accrued revenuesselected answer correctd.To record expiration of prepaid insurance.Prepaid expensesselected answer correcte.To record annual depreciation expense.Prepaid expenses

For each separate case below, follow the three-step process for adjusting the prepaid asset account at December 31. Step 1: Determine what the current account balance equals.Step 2: Determine what the current account balance should equal.Step 3: Record the December 31 adjusting entry to get from step 1 to step 2. Assume no other adjusting entries are made during the year.

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