21. 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

22. Under an operating lease, the monthly payments are considered a(n) ____________________.

  • Deferred Revenue
  • Operating Expense
  • Other Asset
  • Other Accrued Liability

23. True or False: For tax purposes, an operating lease is NOT considered a rental expense.

  • True
  • False

24. The following are true about operating leases except:

  • They do not record interest expense.
  • They record the lease expense as an operating expense.
  • They record interest as an expense.
  • They do not record depreciation expense.

25. A lease in which the transfer of ownership is not intended at the end of the lease life is called _________.

  • Equipment Lease
  • Transfer Lease
  • Operating Lease
  • Capital Lease

26. When considering the service life of an asset, the estimate is based on all of the following considerations: (Select all that apply)

  • How complex the item is (high tech vs low tech).
  • The total cost of the item relative to other similar items.
  • How often the item will be used.
  • How long the item will last relative to other similar items.

27. The party who owns the asset that is being rented or leased is known as ________.

  • Capital Lease
  • Lease
  • Lessee
  • Lessor

28. True or False: Some assets return value after their service life.

  • True
  • False

Shuffle Q/A 3

29. Which of the following are examples of PP&E? (Select all that apply)

  • Cash
  • Inventory
  • A company truck
  • Land

30. Sanjay has a food truck, “Pakora”, that specializes in his culture’s cuisine. He is leasing the truck through a capital lease. His original cost was $35,500 and the expected useful life of this vehicle is 8 years.

Using straight line depreciation, what is Sanjay’s annual depreciation on his food truck? (Format your answer as $x,xxx.xx)

$4,437.50

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