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Plant Asset,Depreciation,Prepaid insurance,Interest on Notes

1. A main accounting issue for plant assets is:

A) Computing the cost of the plant assets.
B) Matching the costs of plant assets against revenues for the periods they benefit.
C) Accounting for repairs and improvements to plant assets.
D) The disposal of plant assets.
E) All of the above.

2. Nelson Company purchased equipment on July 1 for $27,500 and decided to depreciate the equipment on the straight-line method over its useful life of five years. Assuming the equipment's salvage value is $3,500, the amount of monthly depreciation expense Nelson should recognize is:

A) $2,400
B) $200
C) $4,800
D) $400
E) $450

3. A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in:

A) $200 less in net income.
B) $200 more in net income.
C) $200 difference between the debit and credit columns of the Unadjusted Trial Balance.
D) $200 of prepaid insurance.
E) An error in the financial statements.

4. A company borrowed $10,000 by signing a 180-day promissory note at 11%. The total interest due on the maturity date is.

A) $50
B) $275
C) $550
D) $825
E) $1,100

Solution Preview

1 - B

2 - D

Depreciation = (cost - salvage value)/usefule life.
Given cost = 27500; salvage value = 3500; life ...

Solution Summary

The solution computes Depreciation, Prepaid insurance, Interest on Notes.