For each of the questions below:

1. Provide a brief explanation of the correct answer (in bold)).
2. Provide a brief statement of why the Incorrect Answer are wrong or not the best answer.

2) Rico Inc. issues a 90-day, 4%, $3,000 note on account. This transaction _____.

a) increases net assets and earnings per share of the company

b) decreases net assets and increases earnings per share of the company

*c) has no effect on net assets and earnings per share of the company

d) decreases net assets and earnings per share of the company

3) As interest is recorded on an interest-bearing note, the Interest Expense account is ______.

a) decreased; the Interest Payable account is increased.

*b) increased; the Interest Payable account is increased.

c) increased; the Notes Payable account is decreased.

d) increased; the Notes Payable account is increased.

4) Which of the following is true of a variable cost?

a) Total variable cost remains constant with changes in the number of goods sold.

b) Unit variable cost decreases with an increase in production.

*c) Unit variable cost remains constant with changes in production.

d) Total variable cost decreases with an increase in the number of goods sold.

5) Fixed assets are ordinarily presented on the balance sheet ________.

a) at their current market value

b) at their replacement cost

*c) at their cost less accumulated depreciation

d) under intangible assets