Property and Equipment Assessment Flashcards
Bill is so excited about opening up his BBQ joint, “Sop ‘n Mop Rib Shack”. He only has a few things left to do before opening day. One task is to sign the lease for his 3 BBQ Smokers that just arrived. He is leasing them from the best BBQ Smoker supplier in town, Smokey’s Pit Boss. The lease is a capital lease with a term of 6 years with 10% interest.
In this example, Bill is considered the _________________ on the lease, and Smokey’s PitBoss is considered the ___________________.
Lessee, Lessor
Bill is so excited about opening up his BBQ joint, “Sop ‘n Mop Rib Shack”. He only has a few things left to do before opening day. One task is to sign the lease for his 3 BBQ Smokers that just arrived. He is leasing them from the best BBQ Smoker supplier in town, Smokey’s Pit Boss. The lease is a capital lease with a term of 6 years with 10% interest.
Since Bill’s lease is a capital Lease, all of the following are true except:
All risks and benefits are transferred to Bill.
Bill is responsible for the insurance, maintenance, and taxes of the smokers.
Bill can claim the smokers as an asset, as well as account for depreciation of this asset on his balance sheet.
The payments for the smokers are considered an expense, since Bill is paying to lease them.
The payments for the smokers are considered an expense, since Bill is paying to lease them.
Larry Smith purchased equipment for $50,000 on January 1, 2020. Its useful life will be 7 years. What will his yearly Depreciation Expense be assuming straight-line depreciation?
7142.86
On January 1, 2020, Marcy acquired a small bass boat for $10,000 to use as a business expansion for her fishing shop, “Bass and Brim”. Her goal is to offer charters for tourists and new anglers. The boat’s useful life is expected to be 10 years, and the salvage value is expected to be $0. After 4 years of use, it was determined that the boat would be useful for only three more years, meaning that the total useful life of the boat will be 7 years instead of 10. Marcy uses the straight-line method of depreciation.
Based on this information what amount should Marcy list as the Depreciation Expense for 2025? (Format your answer as $x,xxx)
2,000
In order to adhere to the matching principle, depreciation expense is shown on the income statement.
True
PP&E are considered which of the following:
Liabilities
Current Assets
Inventory
Non-current Assets
non-current assets
Gavin is the owner of ‘Single Track’, a mountain and dirt biking park. He has decided to try and get more riders in the winter snow season and has purchased 10 fat-tire bikes. He paid $14,345 for the bikes themselves, 7% sales tax, $1,200 delivery fee, and $500 delivery insurance coverage.
When setting up his fixed asset account for these new rental bikes, what is Gavin’s original cost? (Format your answer as $xx,xxx.xx)
$17,049.15
Under an operating lease, the monthly payments are considered a(n) ____________________.
Other Accrued Liability
Other Asset
Deferred Revenue
Operating Expense
Operating Expense
True or False: For tax purposes, an operating lease is NOT considered a rental expense.
False
The following are true about operating leases except:
They do not record depreciation expense.
They record interest as an expense.
They record the lease expense as an operating expense.
They do not record interest expense.
They record interest as an expense.
A lease in which the transfer of ownership is not intended at the end of the lease life is called _________.
Transfer Lease
Operating Lease
Capital Lease
Equipment Lease
Operating Lease
When considering the service life of an asset, the estimate is based on all of the following considerations: (Select all that apply) : How long the item will last relative to other similar items., How often the item will be used, The total cost of the item relative to other similar items, How complex the item is (high tech vs low tech).
How long the item will last relative to other similar items.
How often the item will be used.
The party who owns the asset that is being rented or leased is known as ________.
lessor
True or False: Some assets return value after their service life.
True
Which of the following are examples of PP&E? (Select all that apply)
A company truck, Inventory, Cash, Land
Company Truck
Land
