Crouch Apartments purchased an apartment building to rent to university students on December 15, 2012. The tenants moved in on January 1, 2013. 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 not be recorded as the tenants will be charged for the damage.
c. It should be recorded as repair and maintenance expense.
d. It should not be recorded since this is an immaterial amount to the landlord.
2015 2014
property, planey, and equipment $250,000 $190,000
accumulated depreciation 100,000 85,000
depreciation expense 62.500 47,500
net sales 1,000,000 900,000
average total assets 625,000 475,000
Refer to the information for Farley River, Inc.
Using the 2015 data, what is the average life of Farley River's property, plant, and equipment (rounded to one decimal place)?
a. 2.5 years
b. 1.6 years
c. 10.0 years
d. 4.0 years
An example of a cash flow related to a liability that would not appear in the financing activities category of the statement of cash flows is:
a. bonds payable.
b. a lease obligation.
c. mortgage payable.
d. deferred income taxes.
Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should:
a. be reported on the statement of retained earnings in the year in which acquired.
b. increase an expense account entirely in the year in which acquired.
c. be amortized over a reasonable period of time not to exceed 40 years.
d. not be amortized.
The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
Mackie's individual retirement account (IRA) currently has a balance of $100,000 and is earning 6%. Beginning one year from today, what equal annual amounts can be withdrawn from the IRA for 10 years so that the balance after the tenth withdrawal is zero?
a. $14,237
b. $12,950
c. $10,000
d. $13,587