State whether each situation is a prepaid expense (PE), unearned revenue (UR), a

Question

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

1. Unrecorded interest on savings bonds is $245. Accrued expensePrepaid expenseUnearned revenueAccrued revenue 2. Property taxes that have been incurred but that have not yet been paid or recorded amount to $300. Accrued expenseAccrued revenuePrepaid expenseUnearned revenue 3. Legal fees of $1,000 were collected in advance. By year end 60 percent were still unearned. Accrued expensePrepaid expenseAccrued revenueUnearned revenue 4. Prepaid insurance had a $500 balance prior to adjustment. By year end, 40 percent was still unexpired. Accrued expenseAccrued revenuePrepaid expenseUnearned revenue 5. Unpaid salaries earned by year end but not yet paid or recorded amounted to $1,200.

Explanation / Answer

1 Unrecorded interest on savings bonds is $245. Accrued Revenue As interest is earned but not yet received. 2 Property taxes that have been incurred but that have not yet been paid or recorded amount to $300. Accrued expense As expense is incurred but not paid 3 Legal fees of $1,000 were collected in advance. By year end 60 percent were still unearned. 60% of legal fees received is a unearned revenue As $ 600 is received but services are still not performed 4 Prepaid insurance had a $500 balance prior to adjustment. By year end, 40 percent was still unexpired. prepaid expense amounting to $ 300 (500*.40) ,rest 200 is an actual expense Expense paid in advance 5 Unpaid salaries earned by year end but not yet paid or recorded amounted to $1,200. Accrued expense expense incurred but not yet paid

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