BE3-2 Nunez Company accumulates the following adjustment data at December 31. In

Question

BE3-2

Nunez Company accumulates the following adjustment data at December 31. Indicate (a) the type of adjustment (prepaid expense, accrued revenues and so on), and (b) the status of accounts before adjustment (overstated or understated).

1. Supplies of $100 are on hand.
2. Services provided but not recorded total $900.
3. Interest of $200 has accumulated on a note payable.
4. Rent collected in advance totaling $800 has been earned.



(a) Type of adjustment

1.
2.
3.
4.






(b)
Account Balances before Adjustment

1.

2.
3.
4.

Explanation / Answer

a. 1. prepaid expense (also known as deferred expense) 2. accrued revenue 3. accrued expense 4. unearned revenue (also known as deferred revenue) b. 1. Supplies are overstated; supplies expense is understated 2. Revenue is understated; Accounts receivable is understated 3. Interest expense is undertated; interest payable is understated 4. Unearned revenue is overstated; rent revenue is understated

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