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:

Equivalent Cost

The cost associated with producing an additional unit of output when costs are shared among products or services.