Select the best situation
prepaid expense (PE), revenue received in advance (RRA), accrued revenue (AR) or an accrued expense (AE).
-Prepaid insurance had a $500 balance prior to adjustment. By year end, 40 percent was still unexpired.
A) prepaid expense (PE)
B) revenue received in advance (RRA)
C)accrued revenue (AR)
D)an accrued expense (AE).

Question

Select the best situation 
prepaid expense (PE), revenue received in advance (RRA), accrued revenue (AR) or an accrued expense (AE).
-Prepaid insurance had a $500 balance prior to adjustment. By year end, 40 percent was still unexpired.
A) prepaid expense (PE)
B) revenue received in advance (RRA)
C)accrued revenue (AR)
D)an accrued expense (AE).

Quizplus · Accepted Answer

This situation describes a prepaid expense (PE) because it involves payment for insurance that has not yet been fully utilized or expired by the end of the accounting period. The fact that 40 percent is still unexpired indicates that it is a cost paid in advance for future benefit, which is the definition of a prepaid expense.

Select the Best Situation