Question

multiple select question
select all that apply
determine which of the following transactions may require adjustments.
an employee was paid his weekly wages in full at the end of the week.
a 24-month insurance policy was prepaid
six months of rent were paid in advance.
an advance payment was received from a customer earlier in the month, but only partially earned by the end of the month.
a one-month premium on an insurance policy was paid
supplies were purchased at the beginning of the year, but not all were used.
equipment was purchased in the middle of the year.
rent was paid for the month.

Explanation:

Adjusting entries are needed to match revenues/expenses to the correct accounting period:

1. Prepaid multi-period insurance: The cost is used over 24 months, so monthly expense adjustments are required.
2. Prepaid six-month rent: Rent expense is incurred monthly, so adjustments are needed to recognize monthly cost.
3. Partial earned customer advance: The unearned portion remains a liability, so an adjustment recognizes the earned revenue.
4. Unused supplies: Only used supplies count as expenses, so an adjustment reduces the asset to reflect used amounts.
5. Mid-year equipment purchase: Equipment depreciates over its useful life, so an adjustment recognizes depreciation expense for the partial year.

Transactions where revenue/expense is fully recognized in the current period (weekly wages paid at week-end, 1-month insurance, monthly rent paid) do not require adjustments.

Answer:

• a 24-month insurance policy was prepaid
• Six months of rent were paid in advance.
• An advance payment was received from a customer earlier in the month, but only partially earned by the end of the month.
• Supplies were purchased at the beginning of the year, but not all were used.
• Equipment was purchased in the middle of the year.