Regina Company started operations in 2024. The following transactions were recorded during the year:

On March 1, 2024, Regina Company paid a one-year advertising contract for P120,000. Regina Company recorded the transaction in nominal account

On May 31, 2024 Regina Company subleased office spaces for a two-year period and received P252,000. Regina Company recorded the collection in an income account

On June 30, 2024, supplies totaling P90,000 were acquired and were recorded in a prepaid supplies account. A physical count at the end of the year indicated that around P20,000 were on hand

On October 1, 2024, Regina Company received P360,000 for a one-year membership in its warehouse club. Regina Company recorded the collection in a liability account

Before yearend adjustments, income and expenses were P600,000 and P420,000 respectively.

I. If no adjusting entries are prepared total income would be overstated by P88,500

II. The adjusting entry in relation to the office spaces that were subleased would include a debit to unearned rent and a credit to rent income for P178,500

A. Only statement I is true

B. Only statement II us true

C. Both statements are true

D. Both statements are false

CORRECT ANSWER is LETTER A.