1.

Wexford Co. purchased a new delivery truck at the beginning of 2017. The truck has a cost of $37,000, an estimated life of five years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2017. The truck was driven 20,000 miles during 2017 and 24,000 miles during 2018. The number of expected miles over five years is 100,000. Refer to the information for Wexford Co. Wexford 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 2017?

a.Straight-line depreciation creates both the larger expense and the larger tax savings.

b.Double-declining-balance depreciation creates both the larger expense and the larger tax savings.

c.Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings.

d.Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings.

2.

Interest is capitalized when incurred in connection with the construction of plant assets because

a.interest is considered an expense of the period.

b.many plant assets last longer than 20 years.

c.the decision to purchase a plant asset is a business decision separate from the financing decision.

d.interest is considered a part of the acquisition cost of the related plant asset.

3.

Which of the following is an example of a capital expenditure?

a.Replacing an engine in a company car

b.Cleaning the carpet in the front room

c.Tune-up for a company truck

d.Replacing burned-out light bulbs in the factory