Question

Four types of adjustments are described in the chapter: (1) prepaid expenses, (2) unearned revenues,(3) accrued expenses, and (4) accrued revenues.

Required

1. Form learning teamsof four (or more) members. Each team member must select one of the four adjustmentsas an area of expertise (each team must have at least one expert in each area).

2. Form expert teamsfrom the individuals who have selected the same area of expertise. Expert teamsare to discuss and write a report that each expert will present to his or her learning team addressing thefollowing:

a. Description of the adjustment and why it’s necessary.

b. Example of a transaction or event, with dates and amounts, that requires adjustment.

c. Adjusting entry(ies) for the example in requirement b.

d. Status of the affected account(s) before and after the adjustment in requirement c.

e. Effects on financial statements of not making the adjustment.

3. Each expert should return to his or her learning team. In rotation, each member should present his orher expert team’s report to the learning team. Team discussion is encouraged.

Short answer

Krug company receives advance rent of 12 months.

Step-by-step solution

Step-by-Step SolutionStep 1:Definition of adjustment entry

It is the entry that updates the balance of all accounts.

Transaction

The Krug Company collected $6,000 rent in advance on November 1, debiting

Cash and crediting Unearned Rent Revenue. The tenant was paying 12 months’ rent in advance, and occupancy began on November 1.