Question : 21. Clear Window CleanersClear Window Cleaners purchased new cleaning equipment at : 1224939

21. Clear Window Cleaners
Clear Window Cleaners purchased new cleaning equipment at the beginning of 2011. The equipment has a cost of $53,000, an estimated life of 5 years, and an estimated residual value of $3,000. A full year’s depreciation expense is to be recorded in 2011. The equipment was used 20,000 hours during 2011 and 24,000 hours during 2012. The number of expected hours over five years is 125,000.

Refer to the information provided for Clear Window Cleaners. Clear Window Cleaners wants to use the depreciation method that will result in the highest net income for 2011. Which method should be used? 
A. Straight-line
B. Units-of-activity
C. Double-declining-balance
D. All methods create the same income in 2011.

22. If the depreciation method is known, which of the following sets of factors is needed to calculate depreciation on plant and equipment? 
A. The asset’s historical cost, replacement cost, and its estimated salvage value
B. The estimated salvage value of the asset, its replacement cost, and its market value
C. The asset’s replacement cost, its estimated life, and its estimated salvage value
D. The useful life of the asset, its historical cost, and its estimated salvage value

23. Butler Corporation uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration. Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of the company’s assets? 
A. Double-declining-balance method
B. Revenue expenditure method
C. Straight-line method
D. Units-of-activity method

24. Fly High Airlines acquires a new aircraft. It has an estimated life of 10 years and should be used for 20,000 hours of flight. What is the most appropriate method of depreciation to properly match revenues and expenses? 
A. Double-declining-balance method
B. Revenue expenditure method
C. Straight-line method
D. Units-of-activity method

25. A company should choose a depreciation method that: 
A. best allocates the original cost of the asset to the periods benefited by the use of the asset.
B. saves the most taxes by generating the highest amount of expense and decreasing the net income.
C. generates the most conservative estimate of the depreciation expense for the period.
D. shows the highest amount of net income.

26. If technology changes rapidly, a firm should: 
A. depreciate plant assets using the same method used for its tax returns.
B. depreciate plant assets over long periods of time.
C. consider an accelerated rate of depreciation.
D. use the straight-line method of depreciation as it is the easiest.

27. Wilshire purchased equipment at the beginning of 2011 for $19,000. Wilshire decided to depreciate the equipment over a 6-year period using the straight-line method. Wilshire estimated the equipment’s salvage value at $1,000. The estimated fair market value at the end of 2011 was $18,000. Which of the following statements is correct concerning Wilshire’s financial statements at December 31, 2011? 
A. The book value of the equipment is $15,000.
B. The book value of the equipment is $16,000.
C. The total accumulated depreciation is $3,167.
D. The equipment will be reported on the balance sheet at it fair market value of $18,000.

28. Zero, Inc. purchased equipment at the beginning of 2011 for $200,000. Zero decided to depreciate the equipment over a 5-year period using the double-declining-balance method. Zero estimated the equipment’s salvage value at $20,000. Which of the following statements is correct concerning Zero’s financial statements at December 31, 2011? 
A. The book value of the equipment is $120,000.
B. The book value of the equipment is $80,000.
C. The total accumulated depreciation is $90,000.
D. Depreciation expense for 2011 is $72,000.

29. Using different depreciation methods for book purposes versus tax purposes for the same asset is: 
A. not allowed since the amount can only be calculated one way or the other, not both.
B. the direct result of the differing goals of financial and tax accounting.
C. contrary to GAAP.
D. against the Internal Revenue Code, and as such, against the law.

30. Disc Company purchased equipment at the beginning of 2010 for $200,000. The company decided to depreciate the equipment over an 5-year period using the straight-line method. The company estimated the equipment’s salvage value at $20,000. The journal entry to record depreciation expense for 2011 is a debit to: 
A. depreciation expense and a credit to accumulated depreciation for $40,000.
B. accumulated depreciation and a credit to equipment for $40,000.
C. depreciation expense and a credit to equipment for $36,000.
D. depreciation expense and a credit to accumulated depreciation for $36,000.