Question

Wang Company accumulates the following adjustment data at December 31. For each item, indicate (1) the type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense) and (2) the status of the accounts before adjustment (overstated or understated).
a. Services performed but unbilled totals $600.
b. Store supplies of $160 are on hand. The supplies account shows a $1,900 balance.
c. Utility expenses of $275 are unpaid.
d. Service performed of $490 collected in advance.
e. Salaries of $620 are unpaid.
f. Prepaid insurance totaling $400 has expired.

Answer 1

Answer:

a. Services performed but unbilled totals $600.

• Accrued revenue
• Accounts receivable was understated before the adjustment

b. Store supplies of $160 are on hand. The supplies account shows a $1,900 balance.

• Accrued expense
• Supplies was overstated before the adjustment

c. Utility expenses of $275 are unpaid.

• Accrued expense
• Utilities expense was understated before the adjustment

d. Service performed of $490 collected in advance.

• Unearned revenue
• Revenue was overstated before the adjustment

e. Salaries of $620 are unpaid.

• Accrued expense
• Wages expense was understated before the adjustment

f. Prepaid insurance totaling $400 has expired.

• Prepaid expense
• Insurance expense was understated