Question

Cortina Company accumulates the following adjustment data at December 31. Indicate (1) the type of adjustment (prepaid expense, accrued revenue, and so on) and (2) the status of the accounts before adjustment (overstated or understated). (Enter your answers in alphabetical order.) Item (1) Type of Adjustment (2) Accounts Before Adjustment a. Supplies of $400 are on hand. Supplies account shows $1,600 balance. select the type of adjustment select the status of the accounts before adjustment select the status of the accounts before adjustment b. Services performed but unbilled total $700. select the type of adjustment select the status of the accounts before adjustment select the status of the accounts before adjustment c. Interest of $300 has accumulated on a note payable. select the type of adjustment select the status of the accounts before adjustment select the status of the accounts before adjustment d. Rent collected in advance totaling $1,100 has been earned.

Answer 1

Cortina Company

Indication of the type of adjustment and the status of the accounts before the adjustment:

Type of adjustment (prepaid Status of the accounts before the

expense, accrued revenue, etc.) adjustment:

a. Usage adjustment Supplies Overstated by $1,200

b. Accrued Revenue Service Revenue understated by $700

c. Accrued Expense Interest Expense understated by $300

d. Earned Revenue Rent Revenue understated by $1,100

and Deferred Revenue overstated by

the same amount.

Step-by-step explanation:

Cortina Company must recognize all revenue and expenses, whether cash has exchanged hands or not, provided they have been earned or incurred within the stated accounting period. This is in accordance with the accrual concept and the matching principle of generally accepted accounting principles.