At the End of 2014, Drew Company Made Four Adjusting

question 38

Multiple Choice

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.
• D) Entry No. 2, No. 3 and No. 4.

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Definitions:

LIFO

Last In, First Out, an inventory valuation method where the most recently produced items are recorded as sold first.

FIFO

An inventory valuation method where the first items produced or purchased are the first used or sold.

FIFO

"First In, First Out," an accounting method for valuing inventory where the first items placed in inventory are the first sold.

Current Costs

The costs that would have to be incurred to replace or reproduce an asset in the current period, under current market conditions.