MB-310 Manage Fixed Assets Practice Test 5 — 15 Questions

Question 1

A fixed asset accountant needs to transfer a fully depreciated asset from the Production department to the Marketing department, but the asset will remain in service and continue to be tracked. The transfer should not affect the asset's financial value. Which action should the accountant perform in Dynamics 365 Finance?

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

Accepted Answer

Create a fixed asset transfer journal.. A fixed asset transfer journal is the correct tool to move an asset between departments or financial dimensions without altering its financial value. It updates the asset's assignment while preserving acquisition cost and accumulated depreciation, ensuring the transfer is auditable and future postings reflect the new department.

Answer

Post a disposal transaction for the Production department and an acquisition for the Marketing department.

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Create a reclassification journal for the fixed asset.

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Modify the department financial dimension directly on the fixed asset record.

Question 2

A consultant is setting up fixed assets in Dynamics 365 Finance for a new legal entity. The company wants to use the fixed asset module to track assets for both financial reporting and tax reporting, with different depreciation methods for each. Which two configurations are required to support this requirement? (Choose two.)

Accepted Answer

Associate both value models with the fixed asset record.. To track fixed assets for both financial and tax reporting with different depreciation methods, you need separate value models for each book and you must associate both value models with each fixed asset. This allows the system to calculate depreciation independently for each book using the respective methods. Fixed asset groups and fiscal calendars are not the determining factors for multiple depreciation methods.

Answer

Create separate fixed asset groups for financial and tax reporting.

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Enable the 'Create depreciation adjustment with basis adjustment' parameter.

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Set up a separate fiscal calendar for each value model.

Question 3

A company has a fixed asset that was acquired with a cost of 50,000 and has accumulated depreciation of 30,000. The company decides to sell the asset for 25,000. The Fixed asset posting profile for disposal-sale is configured with a main account for gain/loss. What is the correct accounting entry for this disposal in Dynamics 365 Finance?

Accepted Answer

Debit Cash 25,000, Debit Accumulated depreciation 30,000, Credit Fixed asset 50,000, Credit Gain on disposal 5,000.. The disposal-sale transaction must remove the asset's original cost and accumulated depreciation, record the cash proceeds, and post the difference between net book value and proceeds to the gain/loss account. With a net book value of 20,000 and proceeds of 25,000, the result is a gain of 5,000, making the entry that debits cash and accumulated depreciation, credits fixed asset, and credits gain correct.

Answer

Debit Accumulated depreciation 30,000, Debit Loss on disposal 20,000, Credit Fixed asset 50,000.

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Debit Cash 25,000, Debit Loss on disposal 5,000, Credit Fixed asset 30,000.

Answer

Debit Cash 25,000, Credit Fixed asset 25,000.

Question 4

A company acquires a new piece of machinery and wants to include the freight and installation costs in the asset's acquisition cost. The invoice for the machinery has been posted, and the freight and installation costs are on a separate vendor invoice. Which transaction type should be used to add these additional costs to the fixed asset?

Accepted Answer

Acquisition adjustment. Acquisition adjustment is designed to add costs to an existing fixed asset after the initial acquisition. Freight and installation costs are capitalizable and should be included in the asset's acquisition cost. By using acquisition adjustment, the additional costs are added to the asset's value and depreciated over its remaining useful life, ensuring accurate financial reporting.

Answer

Acquisition

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Depreciation adjustment

Answer

Revaluation

Question 5

A company has a fixed asset with a value model that uses the 'Reducing balance' depreciation method with a factor of 200 and a useful life of 5 years. After the first year, the net book value is 60,000. The accountant notices that the depreciation for the second year is calculated differently than expected and asks the consultant to explain how the reducing balance method computes depreciation in Dynamics 365 Finance. What should the consultant explain?

Accepted Answer

The reducing balance method calculates depreciation by applying the factor to the straight-line percentage and then to the net book value, and it can switch to straight line when beneficial.. The reducing balance method applies a rate derived from the straight-line percentage multiplied by the factor to the net book value each period. Dynamics 365 Finance also allows an automatic switch to straight-line when that method yields a higher depreciation amount, ensuring the asset is fully depreciated by the end of its useful life. This produces higher depreciation in early periods and lower amounts later.

Answer

The reducing balance method always depreciates a fixed percentage of the original acquisition cost each period, ignoring net book value.

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The reducing balance method requires that the factor be set to 100 and that the useful life be entered in months rather than years.

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The reducing balance method uses the factor to divide the acquisition cost by the useful life, then multiplies by the factor each year.

Question 6

A US-based legal entity in Dynamics 365 Finance uses the calendar year as its fiscal year, and its fixed asset books are configured to automatically create depreciation adjustments when the fiscal calendar changes. In March, the company's leadership approves a change to the corporate fiscal calendar: the fiscal year will now begin on July 1 instead of January 1, effective immediately for the current year. The fixed asset manager must update the fiscal calendar in Dynamics 365 Finance so that depreciation projections and journal entries align with the new fiscal year. What is the FIRST action the manager should take?

Accepted Answer

In General ledger > Calendars > Fiscal calendars, select the existing calendar, and then create a new fiscal year with a July 1 start date.. Fiscal year boundaries for fixed assets are driven by the fiscal calendar referenced by the ledger and book. The correct approach is to add a new fiscal year with the July 1 start date inside the existing fiscal calendar, preserving historical periods and Calendar ID references. Replacing the calendar or altering depreciation profiles does not correctly shift period boundaries.

Answer

Run the Fixed asset calendar synchronization batch job to automatically shift all periods by six months.

Answer

Create a new fiscal calendar with a July 1 start date and assign it to the Fixed asset ledger.

Answer

Reconfigure each fixed asset book's depreciation profile to use a July 1 fiscal year start date.

Question 7

A consulting firm has a fixed asset value model for a high-end server with an acquisition cost of USD 20,000 and a salvage value of USD 2,000. The firm uses the reducing balance depreciation method with a factor of 20%, and the asset was placed in service on January 1. The firm wants to know the depreciation amount for the first year. What will the system calculate as the depreciation expense for the first year?

Accepted Answer

USD 4,000. The reducing balance depreciation method applies a fixed percentage (the factor) to the net book value of the asset at the beginning of each period. For the first year, the net book value equals the acquisition cost because no depreciation has been recorded. Thus, 20% of USD 20,000 yields USD 4,000. The salvage value does not reduce the basis for the calculation; it only ensures that the asset is not depreciated below its salvage value over its life.

Answer

USD 3,000

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USD 3,600

Answer

USD 2,000

Question 8

A multinational company in Dynamics 365 Finance has a fixed asset book configured with a reducing balance depreciation method and a Half year (start of year) convention. An accountant notices that for an asset placed in service on October 15, the first depreciation journal posted a full half-year of depreciation in the current fiscal year, and the remaining half will be applied in the final year of the asset's life. The controller wants to understand why this happened and whether it is correct. What should the functional consultant explain?

Accepted Answer

The Half year (start of year) convention assumes the asset was placed in service at the start of the fiscal year, so a full half-year of depreciation is taken in the acquisition year and the remaining half in the disposal year.. The Half year (start of year) convention assumes the asset entered service at the beginning of the fiscal year of acquisition, producing a half-year of depreciation in that year and the remaining half in the final year. This behavior is expected and is independent of the reducing balance method, which only governs how the rate is applied to net book value.

Answer

The Half year (start of year) convention applies a full year of depreciation in the acquisition year and a half year in the following year.

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The system miscalculated because reducing balance methods ignore conventions and should always prorate depreciation by the number of days in service.

Answer

The depreciation profile is misconfigured; the Half year convention should only be used with the straight line method and not with reducing balance.

Question 9

A consulting firm in Dynamics 365 Finance wants to record the cost of reconfiguring a leased office space as a fixed asset. The improvements are expected to benefit the company for the remaining five years of the lease term, and the company wants depreciation to align with the lease term rather than the asset's physical life. The lease does not transfer ownership. Which approach should the functional consultant recommend?

Accepted Answer

Create a fixed asset with a service life of five years and assign a depreciation profile whose life matches the remaining lease term.. Leasehold improvements should be capitalized and depreciated over the shorter of their useful life or the remaining lease term. Configuring the fixed asset with a five-year service life and a depreciation profile aligned to the remaining lease term accomplishes this, ensuring the asset is fully depreciated by lease end when ownership does not transfer.

Answer

Set up the improvements as an intangible asset and amortize over five years using a reducing balance method.

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Record the improvements as an expense in the current period because the company does not own the leased space.

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Create the fixed asset with a service life equal to the building's remaining physical life and depreciate on a straight line basis.

Question 10

A company is reviewing its fixed asset depreciation setup in Dynamics 365 Finance before year-end close. The controller asks the functional consultant to identify which TWO statements accurately describe how depreciation conventions interact with depreciation methods and how they affect the first and last periods of an asset's life. (Choose two.)

Accepted Answer

The Mid quarter convention applies a half-quarter of depreciation in the quarter the asset is placed in service, with the remaining half applied in the quarter of disposal or retirement.. Depreciation conventions control first- and last-period proration and are independent of the depreciation method, allowing combinations such as Straight line with Half year or Reducing balance with Mid quarter. The Mid quarter convention applies half a quarter in the acquisition quarter and the remainder in the disposal quarter. Conventions apply to all acquisition sources and are not auto-recalculated when changed.

Answer

When you change the depreciation convention on an existing asset book, the system automatically recalculates prior-period depreciation and posts adjusting entries.

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Depreciation conventions only apply to assets acquired through the purchase acquisition type, not to assets created through projects or inventory transfers.

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The Full month convention prorates depreciation based on the exact number of days the asset was in service during the first and last months.

Question 11

A company is setting up a fixed asset that was acquired in a foreign currency. The company's accounting currency is USD, and the asset was purchased for 10,000 EUR. The exchange rate at acquisition was 1.2 USD/EUR. The company wants to ensure that the asset's historical cost in USD is correctly recorded and that any subsequent exchange rate fluctuations do not affect the asset's depreciation. Which setup should be used?

Accepted Answer

Record the acquisition in the fixed asset journal with the USD equivalent using the exchange rate at acquisition, and do not revalue the fixed asset for exchange rate changes.. Fixed assets in Dynamics 365 Finance are recorded in the accounting currency using the exchange rate at the acquisition date. The historical cost is fixed, and subsequent exchange rate movements do not affect the asset's value or depreciation. This treatment is consistent with accounting standards for property, plant, and equipment.

Answer

Record the acquisition in the fixed asset journal with the EUR amount and let the system convert using the daily exchange rate.

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Set up the fixed asset in EUR and use a reporting currency for USD.

Answer

Use a revaluation group to periodically adjust the asset's value for exchange rate changes.

Question 12

A company in Dynamics 365 Finance wants to track the depreciation of its fixed assets for both book and tax purposes. The controller asks the functional consultant to explain how the system supports this dual reporting requirement without duplicating asset records. Which statement best describes the recommended approach?

Accepted Answer

Use multiple books or value models on a single fixed asset record, each configured with its own depreciation profile and posting layer.. The recommended approach is to attach multiple books or value models to a single fixed asset record, each with its own depreciation profile and posting layer. This allows book and tax depreciation to be tracked independently from the same asset, avoiding duplicate records and supporting dual reporting requirements efficiently.

Answer

Post book depreciation to the general ledger and tax depreciation to a separate legal entity, then consolidate the entities for reporting.

Answer

Enable the Dual depreciation feature in Fixed assets parameters, which automatically creates a parallel tax ledger for every book transaction.

Answer

Create two separate fixed asset records for each physical asset, one for book and one for tax, and link them using a parent-child relationship.

Question 13

A company is setting up a new fixed asset value model for office furniture. The company wants to use the straight-line depreciation method over a useful life of 10 years. The asset will be acquired on January 1 for USD 12,000. The company uses a calendar year fiscal period. What will be the annual depreciation expense for this asset?

Accepted Answer

USD 1,200. The straight-line depreciation method allocates the depreciable basis evenly over the useful life of the asset. With an acquisition cost of USD 12,000, no salvage value, and a useful life of 10 years, the annual depreciation is USD 12,000 / 10 = USD 1,200. The system will post this amount each year, assuming a full year of depreciation in the first year, depending on the depreciation convention.

Answer

USD 2,400

Answer

USD 1,000

Answer

USD 100

Question 14

A company is setting up a new fixed asset and wants to record the acquisition cost, but the asset will not be placed in service until a later date. The accountant needs to record the acquisition now and begin depreciating when the asset is placed in service. Which field on the fixed asset value model should be configured to control when depreciation starts?

Accepted Answer

Depreciation starting date. The depreciation starting date on the value model controls when depreciation begins. By setting it to the future in-service date, the acquisition can be recorded now while depreciation starts later. Other fields such as acquisition date, depreciation period, and service life affect reporting, calendar alignment, and duration, but not the start of depreciation.

Answer

Acquisition date

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Service life

Answer

Depreciation period

Question 15

A company is setting up fixed assets in Dynamics 365 Finance. They need to create a new asset that will be depreciated using the reducing balance method. Which two configurations are required to enable this? (Choose two.)

Accepted Answer

Create a depreciation profile with the method 'Reducing balance' and set the percentage.. To enable reducing balance depreciation, you must first create a depreciation profile with the reducing balance method and set the percentage. Then, you assign that profile to a value model or depreciation book that is linked to the fixed asset. These two steps ensure the system calculates depreciation using the reducing balance method. The other options either misplace the method configuration or confuse posting profiles with depreciation profiles.

Answer

Set up a fixed asset group with the 'Reducing balance' depreciation method.

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Create a depreciation book with the 'Reducing balance' method and attach it to the asset.

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Configure the fixed asset posting profile to use the reducing balance method.