17. What is Sheepskin's 2008 net income using cash basis accounting? a. $5,875 b. $1,375 c. $5,625 d. $1,125 18. Adjusting entries are required a. because some costs expire with the passage of time and have not yet been journalized. b. when the company's profits are below the budget. c. when expenses are recorded in the period in which they are incurred. d. when revenues are recorded in the period in which they are earned. 19. A small company may be able to justify using a cash basis of accounting if they have a. sales under $1,000,000. b. no accountants on staff. c. few receivables and payables. d. all sales and purchases on account. 20. Which one of the following is not a justification for adjusting entries? a. Adjusting entries are necessary to ensure that revenue recognition principles are followed. b. Adjusting entries are necessary to ensure that the matching principle is followed. c. Adjusting entries are necessary to enable financial statements to be in conformity with GAAP. d. Adjusting entries are necessary to bring the general ledger accounts in line with the budget. 21. An adjusting entry a. affects two balance sheet accounts. b. affects two income statement accounts. c. affects a balance sheet account and an income statement account. d. is always a compound entry