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36. Regions Inc. pays its rent of $48,000 annually on January 1 and makes monthly adjusting entries. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following are true? a. Failure to make the adjustment does not affect the February financial statements. b. Expenses will be overstated by $4,000 and net income and stockholders' equity will be understated by $4,000 Assets will be overstated by $8,000 and net income and stockholders' equity will be understated by $8,000 Assets will be overstated by $4,000 and net income and stockholders' equity will be overstated by $4,000. c. d. a. b. c. d. are prepared before the financial statements. reduce the number of permanent accounts. cause the revenue and expense accounts to have zero balances. summarize the activity in every account 38. The following information is from the Income Statement of the Dirt Poor Laundry Service Service Revenue 5,500 Expenses Salaries and Wages expense Advertising expense Rent expense Supplies expense 1,950 500 300 200 100 Total expenses 3.050 Net Income The entry to close the expense accounts includes a: a. credit to Income Summary for $3,050. b. debit to Income Summary for $3,050 c. debit to Salaries and Wages Expense for $1,950. d. credit to Retained Earnings for $3,050 39. Gross profit equals the difference between a. net income and operating expenses. b. sales revenue and cost of goods sold. c. sales revenue and operating expenses. d. sales revenue and cost of goods sold plus operating expenses