Jones Bought Insurance on a House When It Was Being

question 21

Multiple Choice

Jones bought insurance on a house when it was being used as his residential dwelling. He subsequently rented out the building to three members of a motorcycle gang. The insurance company was not notified of the change. What would be the result if the house is destroyed by fire?

• A) The failure to notify of the change would void the policy and the insurance company would not have to pay.
• B) The failure to notify of the change would void the policy, but the insurance company would still have to cover the loss.
• C) The failure to notify of the change was immaterial, because there was no proof that is what caused the fire.
• D) The failure to notify of the change was immaterial, because there was no misrepresentation at the time the policy was taken out.
• E) The failure to notify of the change resulted in the insured being charged higher premiums.

Differentiate between the methods of depreciation and calculate depreciation expense.

Understand the treatment and implications of expenditures after initial asset acquisition.

Learn the financial reporting and disclosure requirements for fixed assets.

Grasp the factors affecting the determination of an asset's depreciable life and its residual value.

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Definitions:

Problem Seekers

People who constantly process information looking for problems to solve, even before they occur.

Systematic Thinkers

Individuals who approach problems using a methodical and structured process, analyzing the parts of a system and how they work together.

Complex Problem

A challenge characterized by uncertainty, interconnected parts, and multiple possible solutions that is difficult to solve.

Problem Solving

Involves identifying, analyzing, and finding solutions to problems in order to overcome obstacles or improve situations.