A Machine Was Purchased for $54,000 and It Was Estimated

question 6

Multiple Choice

A machine was purchased for $54,000 and it was estimated to have a $9,000 salvage value at the end of its useful life. Monthly depreciation expense of $750 was recorded using the straight-line method. The annual depreciation rate is

• A) 25%.
• B) 2%.
• C) 16%.
• D) 20%.

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Definitions:

Insurance Expense

The cost attributed to procuring insurance for business operations, properties, liability, and other risk management purposes, treated as an expense on the income statement.

Prepaid Insurance

An asset account representing insurance payments made in advance for coverage that extends to future periods.

Accrued Revenue

Revenue that has been earned but not yet received in cash or recorded, representing goods or services provided to a customer in one accounting period that are paid for in a later period.

Adjusting Entry

Journal entries made at the end of an accounting period to update account balances before preparing financial statements, ensuring they reflect the true financial position.