MB-310 Manage Fixed Assets Practice Question
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.)
⚠ Common exam trap
The trap here is thinking conventions are tied to specific methods or acquisition sources, or that changing a convention retroactively recalculates posted 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
✓
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 analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
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.
Why this is correct
The Mid quarter convention in Dynamics 365 Finance treats the asset as if placed in service at the midpoint of the quarter, resulting in half a quarter of depreciation in the acquisition quarter and the remaining half in the disposal quarter. This convention is commonly used to align with certain tax depreciation rules.
- ✗
When you change the depreciation convention on an existing asset book, the system automatically recalculates prior-period depreciation and posts adjusting entries.
Why it's wrong here
Dynamics 365 Finance does not automatically recalculate or repost prior-period depreciation when you change the convention on an existing book. Historical depreciation entries remain as posted. Any correction requires manual adjustment or specific recalculation features, and the change affects only future depreciation runs based on the new configuration.
- ✗
Depreciation conventions only apply to assets acquired through the purchase acquisition type, not to assets created through projects or inventory transfers.
Why it's wrong here
Depreciation conventions apply regardless of how the asset was acquired. Assets created from purchase orders, projects, inventory transfers, or manual entries all use the depreciation profile and convention configured on the book. The acquisition source affects the posting accounts, not whether the convention is applied during depreciation.
- ✓
A depreciation convention determines how much depreciation is taken in the first and last periods of an asset's life, and it can be combined with different depreciation methods such as Straight line or Reducing balance.
Why this is correct
Depreciation conventions in Dynamics 365 Finance are independent of depreciation methods. They control proration in the first and last periods, and the same convention can be paired with Straight line, Reducing balance, Manual, Consumption, or Factor methods. This separation lets you match jurisdictional rules without changing the calculation method itself.
- ✗
The Full month convention prorates depreciation based on the exact number of days the asset was in service during the first and last months.
Why it's wrong here
The Full month convention does not prorate by days. It treats the asset as if it was placed in service for the entire first month and retired at the end of the last month, producing full monthly depreciation in those periods. Day-level proration is associated with other conventions such as Half year or Mid quarter, depending on configuration.
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Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official Microsoft exam blueprint
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