Taggart Corp. records adjustments each month before preparing monthly financial statements. The following selected account balances on

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Taggart Corp. records adjustments each month before preparing monthly financial statements. The following selected account balances on May 31, 2010, and June 30, 2010, reflect month-end adjustments:


Taggart Corp. records adjustments each month before preparing mo


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1. The company purchased a 36-month insurance policy on June 1, 2009. Identify and analyze the adjustment necessary for insurance on June 30, 2010.
2. What was the original cost of the insurance policy? Explain your answer.
3. The equipment was purchased on February 1, 2009, for $9,600. Taggart uses straight-line depreciation and estimates that the equipment will have no salvage value. Identify and analyze the adjustment necessary for depreciation on June 30, 2010.
4. What is the equipment's estimated useful life in months? Explain your answer.
5. Taggart signed a two-year note payable on February 1, 2009, for the purchase of the equipment. Interest on the note accrues on a monthly basis and will be paid at maturity along with the principal amount of $9,600. Identify and analyze the adjustment necessary for interest on June 30, 2010. 6. What is the monthly interest rate on the loan? Explain youranswer.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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