10 State whether each situation is a prepaid expense PE unea

#10
State whether each situation is a prepaid expense (PE), unearned revenue (UR), accrued revenue (AR) or an accrued expense (AE).

a) Unrecorded interest on savings account is $530.

b) Property taxes that have been incurred but that have not yet been paid or recorded are $300.

c) Legal fees of $1,000 were collected in advance. By year end, 60% are still unearned.

d) Prepaid insurance had a $500 balance prior to adjustment. By year end, 40% is still unexpired.

e) Unpaid salaries earned by year end but not yet paid or recorded are $475.

Solution

a) Unrecorded interest on savings is an accrued revenue. (AR)

b) Property taxes incurred and not recorded is an accrued expense (AE)

c) 60% of legal fee is unearned revenue (UR) and 40% is accrued

d) 40% of prepaid insurance is prepaid expense (PE) and 60% is accrued

e) Unpaid salaries are accrued expense (AE)