The purpose of recording depreciation
on productive assets is to
a.reflect the decline in the market value of the assets each period.
b.reduce income when the company has an exceptionally profitable year.
c.be in conformity with the revenue recognition principle.
d.allocate the original cost of a productive asset to expense over its useful life.
Newell Company debited Prepaid Insurance for $600 on July 1, 2003 for a one-
year fire insurance policy. If he company prepares monthly financial statements,
failure to make an adjusting entry on July 31, for the amount of insurance that has
expired would cause
a. assets to be overstated by $600 and expenses to be understated by $600.
b. expenses to be overstated by $50 and assets to be understated by $50.
c. assets to be overstated by $50 and expenses to be understated by $50.
d. expenses to be overstated by $600 and assets to be understated by $600.