37. Reversing entries are 1. normally prepared for prepaid, accrued, and estimated items. 2. necessary to achieve a proper matching of revenue and expense. 3. useful in simplifying the recording of transactions in the next accounting period. a. 1 b. 2 c. 3 d. 1 and 2 38 Mun Mune Company recorded journal entries for the declaration of $250,000 of dividends, the $160,000 increase in accounts receivable for services rendered, and the purchase of equipment for $105,000. What net effect do these entries have on stockholders' equity? a. Decrease of $355,000 b. Decrease of $195,000 c. Decrease of $90,000. d. Increase of $55,000. 39. Panda Corporation paid cash of $120,000 on June 1, 2017 for one year's rent in advance and recorded the transaction with a debit to Prepaid Rent. The December 31, 2017 adjusting entry is a debit Prepaid Rent and credit Rent Expense, $50,000. b. debit Prepaid Rent and credit Rent Expense, $70,000 c. debit Rent Expense and credit Prepaid Rent, $70,000 d. debit Prepaid Rent and credit Cash, $50,000 40. During the first year of Wilkinson Co.'s operations, all purchases were recorded as assets. Supplies in the amount of $28,800 were purchased. Actual year-end supplies amounted to $6,600. The adjusting entry for store supplies will a. increase net income by $22,200. b. increase expenses by $22,200. c. decrease supplies by $6,600. d. debit Accounts Payable for $6,600