MB-920 Describe Dynamics 365 Finance Practice Question
A manufacturing company uses Dynamics 365 Finance. The finance team needs to automate the calculation of monthly depreciation for fixed assets that are acquired mid-month. Which depreciation method should be configured to ensure proportional depreciation is applied based on the number of days the asset was in service during the first month?
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Straight line service life
Half year convention starts depreciation at the midpoint of the year, not proportional per day. Declining balance is an accelerated method but does not handle mid-month acquisition proportionally. Straight line service life with prorated first month is the correct method to calculate depreciation based on the exact days the asset was in service. Reducing balance is similar to declining balance. Option C is correct.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Reducing balance
Why it's wrong here
Reducing balance is an accelerated method and does not support proportional daily calculation for partial months.
- ✗
Declining balance
Why it's wrong here
Declining balance is an accelerated method that does not proportionally calculate depreciation for partial months.
- ✓
Straight line service life
Why this is correct
Straight line service life allows prorated first month depreciation based on the number of days the asset was in service.
- ✗
Half year convention
Why it's wrong here
Half year convention assumes the asset is placed in service at the midpoint of the year, not proportional per day.
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