In the context of adjusting journal entries and prepaid expenses, contingent projects would imply that:

• A. Certain expenses or revenues are recognized only if specific future events occur.
• B. Adjusting entries are not required for contingent projects.
• C. Prepaid expenses are always recognized as revenue upon payment.
• D. All expenses must be recorded when cash is paid, regardless of when they are incurred.

Answer: (A)

Verified step by step guidance

1. Understand the concept of contingent projects: These are situations where expenses or revenues are recognized only if specific future events occur. This means that recognition depends on the occurrence of certain conditions.
2. Review the purpose of adjusting journal entries: Adjusting entries are made to ensure that revenues and expenses are recognized in the period they are incurred, not necessarily when cash is paid or received. This is based on the accrual accounting principle.
3. Clarify the treatment of prepaid expenses: Prepaid expenses are payments made in advance for goods or services to be received in the future. They are initially recorded as assets and then expensed over time as the benefit is consumed.
4. Evaluate the statement 'Adjusting entries are not required for contingent projects': This is incorrect because contingent projects may require adjusting entries if the conditions for recognition are met during the accounting period.
5. Analyze the statement 'All expenses must be recorded when cash is paid, regardless of when they are incurred': This contradicts the accrual accounting principle, which requires expenses to be recorded when incurred, not necessarily when cash is paid.