Exercise No. 2: Multiple Choice Questions. Instruction: Encircle the letter that contains the best answer for each of the following questions. 1. Adjusting entries will increase or decrease a. Real accounts only b. Nominal accounts only c. Capital account only d. At least a nominal account and a real account 2. To accrue a salary incurred but yet to be paid will require a a. Debit to expense b. Debit to asset c. Credit to income d. Credit to expense 3. The statement of comprehensive income contains a/an a. Prepaid expense b. Unearned rent c. Unused supplies d. Expired insurance 4. In the Statement of Financial Position is reported a/an a. Allowance for bad debt b. Supplies expense c. Interest income d. Expired insurance 5. Accrued revenue to be recorded will a. Decrease assets b. Decrease liabilities c. Increase assets d. Increase expense 6. Accrued expenses to be recorded will a. Increase assets b. Increase liabilities c. Decrease assets d. Decrease liabilities 7. All of the following are adjustments based on estimate, except a. Bad debt expense b. Depreciation c. Amortization d. Accrual. 8. It is one of the adjustments of income already earned but not yet received: a. Prepayment b. Pre-collection c. Accrual d. Amortization 9. An adjustment pertaining to the allocation of total cost over the serviceable life of intangible assets is referred to as a. Prepayment b. Pre-collection c. Accrual d. Amortization 10. If the pre-payment is initially recorded as asset, part of the year-end adjustment will be a a. Debit to expense b. Debit to asset c. Credit to liability d. Credit to income