Page 1
CHAO WANG CM 2113 EXAM PRACTICE 1 AD 2 WITH CORRECT
QUESTIONS AND ANSWERS WITH VERIFIED SOLUTIONS BEST
GRADED YEAR 2025/2026
The contractor purchased the tractor for $220,000 and anticipates a salvage value of $25,000
after 5 years of use. What is the book value at the end of the 1st year if the double declining-
balance method of depreciation accounting is used?
Select one:
a. $132,000
b. $79,200
c. $28,512
d. $47,520
Answer a. $132,000
Equipment depreciation is a/an
Select one:
a. Ownership Cost
b. Operating Cost
Answer a. Ownership Cost
Equipment maintenance and repair is a/an
Select one:
a. Ownership Cost
b. Operating Cost
Answer b. Operating Cost
Equipment service is a/an ___________.
Select one:
a. Ownership Cost
b. Operating Cost
Answer b. Operating Cost
Equipment storage is a/an ___________.
Select one:
a. Operating Cost
b. Ownership Cost
, Page 2
Answer b. Ownership Cost
Fuel to run the equipment is a/an ___________.
Select one:
a. Operating Cost
b. Ownership Cost
Answer a. Operating Cost
Interest paid to finance the cost of the equipment is a/an ___________.
Select one:
a. Operating Cost
b. Ownership Cost
Answer b. Ownership Cost
Operating costs tend to ________ over time
Select one:
a. Vary
b. Decrease
c. Increase
d. Stay the same
Answer c. Increase
Ownership costs tend to ________ over time
Select one:
a. Vary
b. Stay the same
c. Increase
d. Decrease
Answer d. Decrease
Replacing equipment tires are a/an ___________.
Select one:
a. Ownership Cost
b. Operating Cost
Answer b. Operating Cost
Taxes paid on the purchase of a piece of equipment are a/an ___________.
Select one:
, Page 3
a. Operating Cost
b. Ownership Cost
Answer b. Ownership Cost
The equipment operator is a/an ___________.
Select one:
a. Ownership Cost
b. Operating Cost
Answer b. Operating Cost
O&O costs are usually expressed in dollars per equipment operating hour.
Select one:
True
False
Answer True
Tires for wheel-type equipment are a major operating cost, because they have a short life in
relation to the iron of a machine.
Select one:
True
False
Answer True
Tire cost will include both repair and replacement charges, and the tire life is a function of both
project application and equipment/project management.
Select one:
True
False
Answer True
A contractor has purchased a wheel loader for $115,000 and plans to use it 2,000 hours per
year. The cost of one set of tires is $25,000. At this usage rate, the contractor anticipates
disposing of the loader after using it for 10 years and realizing a salvage value of $35,000. The
flywheel horsepower rating of the loader’s diesel engine is 105 horsepower. The interest rate is
10%. The loader operator will earn $34.00 per hour including fringe benefits, and diesel fuel
costs $1.20 per gallon.
How much is the contractor’s hourly depreciation portion of ownership cost for the loader if
using the Time Value Method (see textbook page 42 Example 2.8 for reference)?
CHAO WANG CM 2113 EXAM PRACTICE 1 AD 2 WITH CORRECT
QUESTIONS AND ANSWERS WITH VERIFIED SOLUTIONS BEST
GRADED YEAR 2025/2026
The contractor purchased the tractor for $220,000 and anticipates a salvage value of $25,000
after 5 years of use. What is the book value at the end of the 1st year if the double declining-
balance method of depreciation accounting is used?
Select one:
a. $132,000
b. $79,200
c. $28,512
d. $47,520
Answer a. $132,000
Equipment depreciation is a/an
Select one:
a. Ownership Cost
b. Operating Cost
Answer a. Ownership Cost
Equipment maintenance and repair is a/an
Select one:
a. Ownership Cost
b. Operating Cost
Answer b. Operating Cost
Equipment service is a/an ___________.
Select one:
a. Ownership Cost
b. Operating Cost
Answer b. Operating Cost
Equipment storage is a/an ___________.
Select one:
a. Operating Cost
b. Ownership Cost
, Page 2
Answer b. Ownership Cost
Fuel to run the equipment is a/an ___________.
Select one:
a. Operating Cost
b. Ownership Cost
Answer a. Operating Cost
Interest paid to finance the cost of the equipment is a/an ___________.
Select one:
a. Operating Cost
b. Ownership Cost
Answer b. Ownership Cost
Operating costs tend to ________ over time
Select one:
a. Vary
b. Decrease
c. Increase
d. Stay the same
Answer c. Increase
Ownership costs tend to ________ over time
Select one:
a. Vary
b. Stay the same
c. Increase
d. Decrease
Answer d. Decrease
Replacing equipment tires are a/an ___________.
Select one:
a. Ownership Cost
b. Operating Cost
Answer b. Operating Cost
Taxes paid on the purchase of a piece of equipment are a/an ___________.
Select one:
, Page 3
a. Operating Cost
b. Ownership Cost
Answer b. Ownership Cost
The equipment operator is a/an ___________.
Select one:
a. Ownership Cost
b. Operating Cost
Answer b. Operating Cost
O&O costs are usually expressed in dollars per equipment operating hour.
Select one:
True
False
Answer True
Tires for wheel-type equipment are a major operating cost, because they have a short life in
relation to the iron of a machine.
Select one:
True
False
Answer True
Tire cost will include both repair and replacement charges, and the tire life is a function of both
project application and equipment/project management.
Select one:
True
False
Answer True
A contractor has purchased a wheel loader for $115,000 and plans to use it 2,000 hours per
year. The cost of one set of tires is $25,000. At this usage rate, the contractor anticipates
disposing of the loader after using it for 10 years and realizing a salvage value of $35,000. The
flywheel horsepower rating of the loader’s diesel engine is 105 horsepower. The interest rate is
10%. The loader operator will earn $34.00 per hour including fringe benefits, and diesel fuel
costs $1.20 per gallon.
How much is the contractor’s hourly depreciation portion of ownership cost for the loader if
using the Time Value Method (see textbook page 42 Example 2.8 for reference)?
