MB-310 Manage Fixed Assets Practice Question
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?
⚠ Common exam trap
The trap here is miscalculating the gain or loss by comparing proceeds to the original cost instead of the net book value, or forgetting to clear accumulated depreciation.
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
✓
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 analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Debit Accumulated depreciation 30,000, Debit Loss on disposal 20,000, Credit Fixed asset 50,000.
Why it's wrong here
This entry records a loss of 20,000 and ignores the cash proceeds of 25,000. The loss should be the difference between net book value and proceeds, which is a gain of 5,000, not a loss. The cash receipt must also be recorded to reflect the sale transaction.
- ✗
Debit Cash 25,000, Debit Loss on disposal 5,000, Credit Fixed asset 30,000.
Why it's wrong here
This entry incorrectly credits the fixed asset for only 30,000, leaving a remaining balance of 20,000 on the asset account. It also records a loss when the proceeds exceed the net book value, which should result in a gain. The accumulated depreciation is not cleared, so the asset would not be fully disposed.
- ✗
Debit Cash 25,000, Credit Fixed asset 25,000.
Why it's wrong here
This entry ignores accumulated depreciation and the asset's original cost, and it does not recognize any gain or loss. Disposal in Dynamics 365 Finance must reverse both the cost and accumulated depreciation accounts and post the difference to the gain/loss account, so this entry is incomplete and incorrect.
- ✓
Debit Cash 25,000, Debit Accumulated depreciation 30,000, Credit Fixed asset 50,000, Credit Gain on disposal 5,000.
Why this is correct
The disposal-sale transaction removes the asset's cost and accumulated depreciation and records the cash proceeds. The difference between the net book value of 20,000 and the proceeds of 25,000 is a gain of 5,000, which is credited to the gain/loss account. This entry correctly balances and reflects the sale.
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Last reviewed September 2026 · checked against the official Microsoft exam blueprint
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