If the Ratio of Insurance Expense to Related Property, Plant

question 61

Multiple Choice

If the ratio of insurance expense to related property, plant, and equipment is higher than expected, which of the following is a plausible explanation?

• A)Too much expired insurance is still included in prepaid insurance.
• B)PP&E insurance expense includes some expenses related to product liability insurance.
• C)Depreciation expense was based on overly short useful lives.
• D)Some routine maintenance on equipment was added to the equipment asset account.

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Definitions:

Improper Filing

The submission of legal or official documents in a manner that does not comply with prescribed requirements or regulations.

Unperfected

Refers to a security interest or lien that has not been properly recorded or filed according to law, thus not fully enforceable against third parties.

Secured Transaction

A secured transaction involves a security interest in personal property, which serves as collateral for repayment of a debt or performance of an obligation.

Personal Property

Items of property that are not attached to real estate, such as vehicles, furniture, and electronics.