Zaragoza Company accumulates the following adjustment data at December 31, 2020
- Services performed but not recorded total $1,000.
- Supplies of $300 have been used.
- Utility expenses $225 are unpaid.
- Services related to unearned service revenue of $260 were performed.
- Salaries of $800 are unpaid.
- Prepaid insurance totaling $350 has expired.
Instructions
For each of the above items indicate the following.
- The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense).
- The status of accounts before adjustment (overstatement or understatement).
Answer
Adjustment Analysis
| Item | (a) Type of Adjustment | (b) Accounts before Adjustment |
| 1 | Accrued Revenue | Assets Understated and Revenues Understated |
| 2 | Prepaid Expense | Assets Overstated and Expense Understated |
| 3 | Accrued Expense | Expense Understated and Liabilities Understated |
| 4 | Unearned Revenue | Liabilities Overstated and Revenue Understated |
| 5 | Prepaid Expense | Assets Overstated and Expense Understated |