Question

Hi, Please explain why question
106 "c.   Entry No. 3 and No. 4. " is Correct answer

and question

111 "b.   $2,800,000=$960,000 + $1,140,000 + $700,000 is Correct answer"

Thanks

106. 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. (Correct answer)
d.   Entry No. 2, No. 3 and No. 4.

111.     Eaton Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenue. This account had a balance of $3,800,000 at December 31, 2014 before year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense account, which had a balance of $900,000 at December 31, 2014.

            Service contracts still outstanding at December 31, 2014 expire as follows:

                  During 2015                                           $960,000

                  During 2016                                          1,140,000

                  During 2017                                             700,000

            What amount should be reported as Unearned Service Revenue in Eaton's December 31, 2014 balance sheet?

            a.   $2,900,000.

            b.   $2,800,000. (Correct answer: $960,000 + $1,140,000 + $700,000 = $2,800,000.)

            c.   $1,900,000.

            d.   $1,000,000.

Answer 1