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.

Question

Quizplus · Accepted Answer

Entries for accrued expenses (like interest payable) and accrued revenues (like rent receivable) are often reversed to simplify the recording of actual payments or receipts in the next period. Depreciation and expired insurance are not typically reversed because they relate to the consumption of long-term assets and prepaid expenses, respectively, which do not involve a subsequent transaction that reverses the original entry.

At the End of 2014, Drew Company Made Four Adjusting