If the Ratio of Repairs and Maintenance Expense to Property

question 57

Multiple Choice

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

• A)Routine maintenance on an important piece of machinery was charged to repairs and maintenance expense.
• B)An addition to a building was charged to repairs and maintenance expense.
• C)The company forgot to depreciate all of its equipment.
• D)The company purchased an unusual amount of new equipment.

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Definitions:

Individually Liable

Responsibility of a person to bear the loss or fulfill obligations from their personal assets, independently of others' liabilities.

Preincorporation Contracts

Agreements entered into on behalf of a corporation not yet legally formed, which may bind the corporation once it comes into existence.

Promoter

A person or company that finances or organizes events, especially in entertainment or sports.

Personally Liable

Being individually responsible for a debt or legal obligation, meaning personal assets can be used to satisfy the debt if necessary.