overstatement of liabilities. 4. If a company fails to make an adjusting entry at the end of the period for income tax expense incurred but not yet paid during that period, this will result in: a. Total Liabilities being understated on the Balance Sheet. b. Total Assets being understated on the Balance Sheet. c. Total Assets being overstated on the Balance Sheet. d. Total Liabilities being overstated on the Balance Sheet. 5. Which of the following is an application of accrual accounting? a. Depreciating a building as quickly as allowed by income tax regulations. b. Expensing a machine's cost in the period when the machine is purchased. c. Recording revenue at the time cash payment is received. d. Recording utilities expense in the accounting period covered by the monthly bill. 6. The adjusting entry for the expiration of prepaid advertising, originally recorded as an asset, is: a. Debit Prepaid Advertising; and Credit Cash b. Debit Advertising Expense; and Credit Prepaid Advertising C. Debit Advertising Expense; and Credit Cash d. Debit Prepaid Advertising; and Credit Advertising Expense