Pattie's Event Planning Service Records Prepaid Expenses as Expenses When

question 82

True/False

Pattie's Event Planning Service records prepaid expenses as expenses when cash is paid out,and records unearned revenues as revenues when cash is collected.She then makes adjusting entries as needed to bring her books up to the full accrual basis once a year at the end of the year.This year on December 15,she collected $1,000 from a customer in advance for a series of events that will start in late December and finish in mid-March.At the end of the year,she has finished approximately 10% of the services for her customer.Her adjusting entry at December 31 will include a debit to Service revenue of $900.

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Definitions:

Marginal Cost

Refers to the increase or decrease in the total cost that will result from producing one more or one less unit of a product.

Pumpkins

A large, round, orange fruit with a thick rind, typically harvested in the fall and used both for food (such as in pies) and as decoration (such as jack-o'-lanterns).

Constant Marginal Cost

A situation in which the cost to produce one additional unit of output remains unchanged, regardless of the level of production.

Demand for Wine

The quantity of wine that consumers are willing to purchase at various prices, reflecting the relationship between price and quantity demanded in the wine market.