MB-310 Manage Fixed Assets Practice Test 3 — 15 Questions

Question 1

A fixed asset is assigned to a value model that is configured to use the 'Straight line service life' depreciation method with a useful life of 10 years. The asset was placed in service on July 1 of the current fiscal year, but the company's fiscal calendar runs from January 1 to December 31. The accountant wants depreciation to start in July and be prorated for the partial year. Which configuration on the value model ensures that depreciation begins in the month the asset is placed in service and is prorated accordingly?

Choose an answer to begin — your selection is scored in the full session.

Accepted Answer

Set the 'Depreciation convention' to 'None' and set the 'Depreciation period' to 'Calendar', and ensure the 'Depreciation starting date' is July 1.. To start depreciation in the month the asset is placed in service and prorate the first year, the depreciation convention should be set to None and the depreciation starting date should be set to the in-service date, such as July 1. The depreciation period controls whether the useful life follows the fiscal or calendar year, but it does not determine the start month. This setup ensures accurate partial-year depreciation.

Answer

Set the 'Depreciation convention' to 'Mid month' and set the 'Depreciation period' to 'Calendar'.

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Set the 'Depreciation convention' to 'Full month' and set the 'Depreciation period' to 'Fiscal'.

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Set the 'Depreciation convention' to 'Half year' and set the 'Depreciation period' to 'Calendar'.

Question 2

A company has a fixed asset with a cost of $100,000, a salvage value of $10,000, and a useful life of 5 years. The company uses the reducing balance depreciation method with a factor of 200%. After the first year, the company decides to change the depreciation method to straight line for the remaining useful life. How should this change be handled in Dynamics 365 Finance?

Accepted Answer

Adjust the existing value model's depreciation profile to straight line and process a depreciation adjustment.. Changing the depreciation method is a change in accounting estimate. In Dynamics 365 Finance, you update the depreciation profile on the value model to straight line, and then run the depreciation adjustment process. The system will recalculate the depreciation for the remaining life based on the net book value at the time of change, ensuring compliance with accounting standards.

Answer

Create a new value model with the straight line method and transfer the net book value to it.

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Dispose of the asset and reacquire it with the new depreciation method.

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Manually calculate the remaining depreciation and post a general journal entry to adjust the accumulated depreciation.

Question 3

A company has a fixed asset with a net book value of USD 50,000. The company decides to sell the asset for USD 45,000. The fixed asset posting profile for disposal - sale is configured with a main account for loss on disposal and a main account for gain on disposal. After posting the disposal, what will be the accounting entry for the loss?

Accepted Answer

Debit Loss on Disposal USD 5,000; Credit Fixed Asset USD 50,000; Debit Cash USD 45,000. When a fixed asset is sold, the system removes the net book value from the balance sheet and records the proceeds. If the proceeds are less than the net book value, a loss on disposal is recognized. The correct entry debits cash for the proceeds, debits the loss account for the difference, and credits the fixed asset account for the net book value. This reflects the economic substance of the transaction and aligns with the configured posting profile.

Answer

Debit Cash USD 45,000; Debit Accumulated Depreciation USD 50,000; Credit Fixed Asset Cost USD 95,000

Answer

Debit Fixed Asset USD 50,000; Credit Loss on Disposal USD 5,000; Credit Cash USD 45,000

Answer

Debit Loss on Disposal USD 5,000; Credit Cash USD 45,000; Credit Fixed Asset USD 50,000

Question 4

A legal entity acquires a new delivery truck for $80,000 on March 15. The company wants depreciation to begin on April 1 and has configured a depreciation convention that prorates the first month. Which configuration must be set on the value model to ensure depreciation starts in the correct period?

Accepted Answer

Depreciation convention. The depreciation convention on the value model controls how depreciation is calculated for partial periods, including the first month after acquisition. A full-month convention causes depreciation to begin on the first day of the month following the placed-in-service date, which matches the requirement to start on April 1. The depreciation profile and service life affect the calculation but not the timing of the first entry.

Answer

Depreciation profile

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Depreciation run date

Answer

Service life

Question 5

A company is implementing Dynamics 365 Finance and needs to track fixed assets that are shared across multiple cost centers. The controller wants depreciation expenses to be automatically split among the cost centers based on a defined percentage. Which TWO configurations are required to achieve this? (Choose two.)

Accepted Answer

Set up a fixed asset allocation rule that distributes the depreciation amount across financial dimensions.. To automatically split depreciation across cost centers, you must create a fixed asset allocation rule that defines the percentage distribution across financial dimensions, and then assign that rule to the value model of the asset. The allocation rule performs the split during depreciation proposal and posting, ensuring the expense is distributed correctly without creating multiple asset records.

Answer

Create a separate fixed asset for each cost center and transfer a portion of the cost to each.

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Configure the ledger account for depreciation expense to use a default financial dimension of 'Cost center' and leave it blank.

Answer

Enable the 'Allow multiple dimensions' option on the Fixed asset parameters form.

Question 6

A company is implementing Dynamics 365 Finance Fixed Assets. They need to configure the system so that when a fixed asset is disposed of, the correct accounts are used for the gain or loss on disposal. Which two setups are required to achieve this? (Choose two.)

Accepted Answer

Configure the Fixed asset posting profile to include disposal accounts.. To correctly account for fixed asset disposals, you must configure the Fixed asset posting profile with the appropriate disposal accounts and assign that posting profile to the value model used by the asset. This ensures that when a disposal is posted, the system uses the defined accounts for gain or loss and for removing the asset's cost and accumulated depreciation.

Answer

Set up a value model with the Disposal transaction type enabled.

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Define a disposal journal name in the Fixed asset parameters.

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Create a disposal transaction type in the Fixed asset transaction types form.

Question 7

A legal entity in Dynamics 365 Finance acquires a new delivery truck on October 15. The company's depreciation convention for vehicles is 'Half year' and the depreciation profile is 'Straight line life remaining'. The asset is placed in service on October 15. The fiscal year ends December 31. How will the system calculate depreciation for the first year?

Accepted Answer

It will depreciate the asset for half of the annual depreciation amount in the first year.. The half-year convention in Dynamics 365 Finance treats all assets acquired during the year as if they were placed in service at the midpoint, resulting in exactly half of the annual depreciation in the first year. This is irrespective of the actual acquisition date. The other options either ignore the convention, incorrectly apply a prorated calculation, or defer depreciation entirely, all of which contradict the configured half-year convention.

Answer

It will depreciate the asset for two and a half months (from October 15 to December 31).

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It will depreciate the asset for a full year, ignoring the half-year convention.

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It will not depreciate the asset in the first year; depreciation begins in the following fiscal year.

Question 8

A company has a fixed asset with a net book value of $12,000 and a remaining useful life of two years. The company decides to reclassify the asset to a different fixed asset group that uses a different depreciation profile. What is the correct sequence to update the asset's financial information?

Accepted Answer

Create a new value model with the new depreciation profile, transfer the net book value to the new value model, and then dispose of the old value model.. Changing an asset's depreciation profile requires creating a new value model with the new profile, transferring the net book value, and disposing of the old value model. This approach maintains a clear audit trail and ensures the asset depreciates correctly under the new method. Directly editing the existing value model's profile is not allowed once transactions have posted, and changing the fixed asset group alone does not affect depreciation calculations.

Answer

Adjust the service life on the existing value model to match the new depreciation profile's expected life.

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Change the fixed asset group on the asset record, then run the depreciation proposal.

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Use the Fixed asset reclassification journal to move the asset to the new fixed asset group and automatically update the value model's depreciation profile.

Question 9

A company has a fixed asset that was acquired on April 1 for USD 30,000 with a useful life of 5 years and no salvage value. The company uses the straight-line depreciation method and a mid-month convention. The company's fiscal year ends on December 31. What will be the depreciation expense for the first fiscal year?

Accepted Answer

USD 4,250. The mid-month convention in Dynamics 365 Finance treats assets as placed in service or disposed of at the midpoint of the month, regardless of the actual day. For an April 1 acquisition, half of April's depreciation is taken, plus full depreciation for May through December. The monthly depreciation is USD 30,000 / 60 months = USD 500. Thus, the first fiscal year depreciation is (0.5 * 500) + (8 * 500) = USD 4,250.

Answer

USD 4,500

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USD 4,000

Answer

USD 6,000

Question 10

A fixed asset manager needs to record the acquisition of a new delivery truck. The truck was purchased from a vendor for $45,000, and an additional $2,000 was paid for a custom paint job. Both amounts should be capitalized as part of the asset cost. Which acquisition method should be used to record both costs in a single acquisition transaction?

Accepted Answer

Acquisition with a multi-line journal entry. The acquisition journal in Dynamics 365 Finance supports multiple lines, enabling you to record the truck cost and the paint job as separate lines that together form the total acquisition cost. This provides a clear audit trail of the components and posts a single acquisition transaction. Other methods are less suited for combining distinct costs from different sources into one acquisition.

Answer

Acquisition proposal

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Acquisition with manually entered value

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Acquisition from purchase order

Question 11

A company is implementing Dynamics 365 Finance Fixed Assets. They need to ensure that when a fixed asset is disposed of, the correct accounts are updated for both the original acquisition cost and the accumulated depreciation. They are configuring the Fixed asset posting profile for disposals. Which two account types must be specified in the posting profile for disposal transactions? (Choose two.)

Accepted Answer

Disposal account. For a disposal that results in a gain, the fixed asset posting profile for disposals must include the disposal account, which records the net book value, and the gain on disposal account, which records the gain amount. The loss on disposal account is not used in this scenario. Acquisition cost and accumulated depreciation accounts are not specified in the disposal posting profile; they are derived from other setups.

Answer

Loss on disposal account

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Accumulated depreciation account

Answer

Acquisition cost account

Question 12

A company is implementing Fixed Assets in Dynamics 365 Finance. The company needs to ensure that when a fixed asset is acquired through a purchase order, the system automatically creates the fixed asset record and posts the acquisition cost. Which two configurations are required to achieve this? (Choose two.)

Accepted Answer

Enable the 'Create fixed asset' option on the item model group used for the purchased item.. To automatically create a fixed asset record when a purchase order is posted, two key configurations are required: a fixed asset group that defines the default value model and depreciation, and an item model group with the 'Create fixed asset' option enabled. The item model group setting tells the system to generate the asset, while the fixed asset group provides the necessary defaults for the asset record. Together, they enable seamless integration between Procurement and Fixed Assets.

Answer

Configure the vendor record to allow fixed asset acquisitions.

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Set up a posting profile for the fixed asset group to define the acquisition accounts.

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Configure the procurement category hierarchy to include fixed asset categories.

Question 13

Your organization requires that a fixed asset be depreciated over a specific number of years, but the depreciation amount must be higher in the earlier years of the asset's life. Which depreciation profile should you configure?

Accepted Answer

Reducing balance. The Reducing balance depreciation method is designed to accelerate depreciation by applying a fixed percentage to the net book value of the asset each period. This satisfies the requirement for higher expenses in the early years. Understanding depreciation profiles is critical for aligning financial reporting with tax regulations and internal accounting policies, ensuring that asset valuation on the balance sheet reflects realistic economic wear and tear over time.

Answer

Straight line service life

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Consumption

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Manual

Question 14

A company is acquiring a fleet of vehicles and needs to track them as fixed assets. Which TWO setups must be completed in Dynamics 365 Finance to ensure these assets are fully operational and depreciable?

Accepted Answer

Configure Fixed Asset Groups. To manage fixed assets, you must define the Asset Group to categorize assets and apply default behaviors like depreciation profiles, and you must associate the asset with a Value Model or Depreciation Book to define the financial tracking and depreciation logic. These steps are fundamental to fixed asset lifecycle management, ensuring that acquisition, depreciation, and disposal processes execute correctly according to corporate accounting standards and financial reporting requirements.

Answer

Enable Asset Leasing

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Create a Vendor Group

Answer

Define a Project Category

Question 15

A company decides to upgrade an existing production machine, which increases the asset's useful life by three years. How should this be handled in Dynamics 365 Finance to maintain accurate financial records?

Accepted Answer

Perform an acquisition adjustment and update the service life.. An upgrade that extends the useful life is considered a capital improvement. You must perform an acquisition adjustment to increase the asset's value and update the asset's 'Service life' field in the Fixed Asset book. This ensures that the depreciation schedule is recalculated based on the new book value and the extended time horizon, keeping the financial statements aligned with the asset's updated economic reality and accounting standards.

Answer

Create a new fixed asset record for the upgrade.

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Expense the upgrade cost immediately in the General Ledger.

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Dispose of the old machine and acquire a new one.