Question

Create t-accounts for each situation and label each transaction as Deferrals/Prepaid or Accrual. Calculate the adjusted balance and use a Bal. post reference to show the ending balance of each account.

1.Completed services that were paid for six months earlier, $4,270. The Service Revenue unadjusted balance as of December 31 is $8,300. The Unearned Revenue balance as of December 31 is $8,500.

2. Used prepaid insurance of $3,140. The Prepaid Insurance unadjusted balance as of December 31 is $10,800. 3. Incurred interest expense of $2,700.

Answer 1

Solution 1:

Adjustment Type:	Deferral / Prepaids
Unearned Revenue
Date	Debit	Credit	Date
31-Dec	$4,270.00	$8,500.00	Bal
		$4,230.00	Bal
Service revenue
Date	Debit	Credit	Date
		$8,300.00	Bal
		$4,270.00	31-Dec
		$12,570.00	Bal

Solution 2:

Adjustment Type:	Deferral / Prepaids
Prepaid Insurance
Date	Debit	Credit	Date
Bal	$10,800.00	$3,140.00	31-Dec
Bal.	$7,660.00
Insurance expense
Date	Debit	Credit	Date
31-Dec	$3,140.00
Bal.	$3,140.00

Solution 3:

Adjustment Type:	Accrual
Interest expense
Date	Debit	Credit	Date
31-Dec	$2,700.00
Bal.	$2,700.00
Interest payable
Date	Debit	Credit	Date
		$2,700.00	31-Dec
		$2,700.00	Bal.