Question : 11. Fisher Apartments purchased an apartment building to rent to university : 1224938

11. Fisher Apartments purchased an apartment building to rent to university students on December 15, 2011. The tenants moved in on January 1, 2012. On Super Bowl Sunday, a student punched a hole in the wall when his favorite team fumbled the ball. It cost the landlord $400 to repair the hole. How should this cost be recorded? 
A. It should be recorded as part of the asset account.
B. It should be recorded as repair and maintenance expense.
C. It should not be recorded as the tenants will be charged for the damage.
D. It should not be recorded since this is an immaterial amount to the landlord.

12. Which of the following should be included in the acquisition cost of a piece of equipment? 
A. Transportation costs
B. Installation costs
C. Testing costs prior to placing the equipment into production
D. All of the above

13. Which of the following is included in the cost of constructing a building? 
A. Insurance costs during construction
B. Cost of property taxes
C. Cost of repairing vandalism damage during construction
D. Cost of removing the demolished building existing on the land when it was purchased

14. Aggie, Inc.
Aggie, Inc. purchased a truck at a cost of $12,000. The truck has an estimated salvage value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2011, and was used 27,000 hours in 2011 and 26,000 hours in 2012.

Refer to Aggie, Inc.’s  information presented above, what method of depreciation will maximize depreciation expense in 2011? 
A. Straight-line
B. Double-declining-balance
C. Units-of-activity
D. All methods produce the same expense in 2011.

15. Aggie, Inc.
Aggie, Inc. purchased a truck at a cost of $12,000. The truck has an estimated salvage value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2011, and was used 27,000 hours in 2011 and 26,000 hours in 2012.

Refer to Aggie, Inc.’s information presented above, if Aggie uses the straight-line method, what is the book value at December 31, 2013? 
A. $  8,000
B. $  6,000
C. $10,000
D. $  4,000

16. Aggie, Inc.
Aggie, Inc. purchased a truck at a cost of $12,000. The truck has an estimated salvage value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2011, and was used 27,000 hours in 2011 and 26,000 hours in 2012.

Refer to Aggie, Inc.’s information presented above, if Aggie uses the units-of-activity method, what is the depreciation rate per hour for the equipment? 
A. $1.00
B. $1.10
C. $  .10
D. $  .12

17. Aggie, Inc.
Aggie, Inc. purchased a truck at a cost of $12,000. The truck has an estimated salvage value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2011, and was used 27,000 hours in 2011 and 26,000 hours in 2012.

Refer to Aggie, Inc.’s information presented above, if Aggie uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2012? 
A. $4,800
B. $2,880
C. $1,728
D. $2,000

18. 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 is comparing the straight-line and double-declining-balance depreciation methods. Of these two methods, which method creates the larger expense and larger tax savings in 2011? 
A. Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings.
B. Straight-line depreciation creates both the larger expense and the larger tax savings.
C. Double-declining-balance depreciation creates both the larger expense and the larger tax savings.
D. Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings.

19. 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. By what amount would double-declining-balance depreciation exceed straight-line depreciation over the 5-year life of the equipment? 
A. The salvage value of $3,000.
B. Cost less total depreciation.
C. Cost plus total depreciation.
D. Total depreciation expenses under double-declining-balance and straight-line depreciation are equal.

20. 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. What is the amount by which double-declining-balance depreciation exceeds straight-line depreciation in the first year of the equipment? 
A. $11,200
B. $13,200
C. $21,200
D. $12,720