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Hi, Please explain why question 106 c. Entry No. 3 and No. 4. is Correct answer and question 111 b. $2,800,000=$960,000 + $1,140,000 +

Hi, Please explain why question 106 "c. Entry No. 3 and No. 4. " is Correct answer

and question

111 "b. $2,800,000=$960,000 + $1,140,000 + $700,000 is Correct answer"

Thanks

106. At the end of 2014, Drew Company made four adjusting entries for the following items: 1. Depreciation expense, $25,000. 2. Expired insurance, $2,200 (originally recorded as prepaid insurance.) 3. Interest payable, $6,000. 4. Rent receivable, $10,000. In the normal situation, to facilitate subsequent entries, the adjusting entry or entries that may be reversed is (are) a. Entry No. 3 only. b. Entry No. 4 only. c. Entry No. 3 and No. 4. (Correct answer) d. Entry No. 2, No. 3 and No. 4.

111. Eaton Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenue. This account had a balance of $3,800,000 at December 31, 2014 before year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense account, which had a balance of $900,000 at December 31, 2014.

Service contracts still outstanding at December 31, 2014 expire as follows:

During 2015 $960,000

During 2016 1,140,000

During 2017 700,000

What amount should be reported as Unearned Service Revenue in Eaton's December 31, 2014 balance sheet?

a. $2,900,000.

b. $2,800,000. (Correct answer: $960,000 + $1,140,000 + $700,000 = $2,800,000.)

c. $1,900,000.

d. $1,000,000.

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