12. 12 On January 1, Michigan Inc. purchased a 1-year insurance policy for $120,000, and the firm makes quarterly financial statements. If the March 31 quarterly adjusting entry for prepaid insurance is omitted, which of the following will be true? a. Assets will be overstated by $10,000 and net income will be understated by $10,000. b. Assets will be overstated by $30,000 and net income will be overstated by $30,000. c. Failure to make the adjustment does not affect the quarterly financial statements. d. Expenses will be overstated by $30,000 and net income and stockholders' equity will be understated by $30,000. 13. Which one of the following events would not require a formal journal entry on a corporation's books? a. 2-for-1 stock split 14. b. 100% stock dividend c. 2% stock dividend d. $1 per share cash dividend Which of the following accounts is a permanent account? a. Common Stock. c. Interest Expense. PA b. Dividends. d. Service Revenue. 15. If the market interest rate is 10%, then a $10,000, 12%, 10-year bond would sell a. at a discount. b. at a premium. c. at face value. d. at a price that cannot be determined. 16. Sales revenue minus cost of goods sold is called a. gross profit. b. net profit. c. net income. d. marginal income.