Test 3 - Chapters 3/4 B

If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future

A liability-revenue account relationship exists with an unearned rent revenue adjusting entry

Unearned revenue is a prepayment that requires an adjusting entry when services are performed

The adjusting entry at the end of the period to record an expired cost may be different depending on whether the cost was initially recorded as an asset or expense

UNDER ORIGINAL METHOD Revenue received before it is earned and expenses paid before being used or consumed are both initially recorded as liabilities

UNDER ORIGINAL METHOD An adjusting entry always requires an Income Statement account and a Balance Sheet account

UNDER ORIGINAL METHOD Asset prepayments become expenses when they expire

UNDER ALTERNATE METHOD Revenue received before it is earned and expenses paid before being used or consumed are both initially recorded as liabilities

UNDER ALTERNATE METHOD An adjusting entry always involved an Income Statement account and a Balance Sheet Account

Asset prepayments become expenses when they expire