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. Formlearning teamsof four (or more) members. Each team member must select one of the four adjustments

as an area of expertise (each team must have at least one expert in each area).

2. Formexpert teamsfrom the individuals who have selected the same area of expertise. Expert teams

are to discuss and write a report that each expert will present to his or her learning team addressing the

following:

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 requirementb.

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

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 or

her expert team’s report to the learning team. Team discussion is encouraged.

Short answer

Answer:

Unearned rent revenue and rent revenue accounts are affected.

Step-by-step solution

Definition of adjustment entry

It is the entry that adjust the balance of accounts which are temporary in nature.

Accounts affected by adjustment

Before adjustment, cash and unearned rent accounts are affected. Because at the time of the entry the cash is received hence the cash account is debited and unearned rent is credited by the company.

After adjustment unearned rent revenue and rent revenue accounts are affected. Because at the end of the year the rent revenue that becomes due is recognized as the rent revenue for this the company debited the unearned rent revenue account and credit rent revenue account.