Fragmental Company leased a portion of its store to another company for eight months beginning on October 1, at a monthly rate of $1,075. Fragmental collected the entire $8,600 cash on October 1 and recorded it as unearned revenue. Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmental Company on December 31 would be:

Multiple Choice

• A debit to Cash and a credit to Revenue for $8,600.

• A debit to Revenue and a credit to Unearned Revenue for $3,225.

• A debit to Revenue and a credit to Cash for $3,225.

• A debit to Unearned Revenue and a credit to Revenue for $3,225.

• A debit to Unearned Revenue and a credit to Revenue for $5,375.

Retained earnings:

Multiple Choice

• Is the cumulative net income (and loss) not distributed as dividends to its stockholders.

• Can only be appropriated by setting aside a cash fund.

• Represent an amount of cash available to pay shareholders.

• Are never adjusted for anything other than net income or dividends.

• Represents the amount shareholders are guaranteed to receive upon company liquidation.