Multiple Choice (2 points each) Circle the best answer to each of the following questions. a 1. If a company makes a journal entry that records a debit to Rent Expense," that journal entry also could include a credit to Cash. b. Accounts Receivable. c. Prepaid Rent. d. Either a. or c. e. Any of the above. Use the following information about Miller Corporation to answer the next four questions. Miller Corporation paid $1,800 and purchased a two-year insurance on September 1, 2020. The policy period starts September 1, 2020 and runs until August 31, 2022. Miller Corporation's fiscal year ends December 31. The company records adjusting entries only at year end. 2. a. What balance is shown for Prepaid Insurance on Miller Corporation's December 31, 2020 Balance Sheet? $1,800 b. $1,500 $900 d. $600 e. $300 c. 3. a. What balance is shown for Insurance Expense on Miller Corporation's fiscal year 2020 Income Statement? $1,800 b. $1,500 $900 d. $600 e. $300 c. 4. a What balance is shown for Insurance Expense on Miller Corporation's fiscal year 2021 Income Statement? $1,800 b. $1,500 c. $900 d. $600 e. $300 5. What balance is shown for Prepaid Insurance on Miller Corporation's December 31, 2021 Balance Sheet? a. $1,800 b. $1,500 c. $900 d. $600 e. $300 6. On October 1, 2020, Perfect Support, Inc. receives $3,000,000 cash from a large corporate client. In return, Perfect will provide technical support services for a 2-year period (i.e., from October 1, 2020 to September 30, 2022). On October 1, 2020, Perfect records a journal entry to debit Cash and credit Unearned Revenue for $3,000,000. If Perfect does not make any other journal entries in 2020 related to this contract, what adjusting journal entry does the company need to make on December 31, 2020? Debit Unearned Revenue and Credit Sales Revenue for $3,000,000. b. Debit Sales Revenue and Credit Unearned Revenue for $375,000. c. Debit Unearned Revenue and Credit Sales Revenue for $375,000. d. Debit Unearned Revenue and Credit Sales Revenue for $1,500,000. a. 7. Which of the following is NOT an application of accrual accounting? a. adjusting unearned revenue to the proper balance at month end. b. recording telephone expense when the monthly bill is received. c. recording service revenue at the time the cash payment is received, regardless of when the work is done. d. recording service revenue at the time the work is done. 8. Which of the following statements is TRUE: a. Recording incurred but unpaid expenses is an example of cash basis accounting. b. Revenues - Net income = Expenses. In accrual accounting, revenue is equal to the cash received by a company during an accounting period. d. Adjusting entries affect only expense and asset accounts. c. 9. If a company fails to make an adjusting entry at the end of the period for supplies used up during that period, this results in: a. Total Liabilities being overstated on the Balance Sheet. b. Total Assets being understated on the Balance Sheet. Total Liabilities being understated on the Balance Sheet. d. Total Assets being overstated on the Balance Sheet. c. a. 10. Failure to make an adjusting entry for wages owed to employees at the end of the period this will result in: Overstatement of net income. b. Understatement of net income. c. Overstatement of expenses. d. Understatement of assets
