Final answer:
Each entry is classified based on the nature of the transaction: cash received in advance for a future delivery is 'Unearned Revenues'; the expiration of prepaid insurance is 'Prepaid Expenses'; rent expense that has been incurred but not paid is 'Accrued Expenses'; using up supplies previously accounted for as an asset is 'Prepaid Expenses'; and earning interest that has not been received or recorded is 'Accrued Revenues'.
Step-by-step explanation:
The task is to classify each adjusting entry as involving prepaid expenses, unearned revenues, accrued expenses, or accrued revenues. Here is how each scenario is classified:
- a. To record cash received from a customer for products that will ship next period - Unearned Revenues.
- b. To record expiration of prepaid insurance - Prepaid Expenses.
- c. To record rent expense incurred but not yet paid - Accrued Expenses.
- d. To record supplies used as supplies expense - Prepaid Expenses.
- e. To record interest revenue earned but not yet collected (nor recorded) - Accrued Revenues.
Prepaid expenses are costs that have been paid but not yet incurred, such as insurance premiums or supplies. Unearned revenues refer to money received before a service has been provided or a product has been delivered. Accrued expenses are costs that have been incurred but not yet paid, like rent or salaries. Finally, accrued revenues are earnings that have been made during a period but have not yet been received in cash or recorded.