MB-310 Manage Fixed Assets Practice Question
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?
⚠ Common exam trap
The trap here is assuming that the salvage value is subtracted from the acquisition cost before applying the reducing balance factor, which would incorrectly lower the first-year 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
✓
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 analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
USD 3,000
Why it's wrong here
This amount would be correct if the straight-line method were used over a useful life of six years (20,000 - 2,000 = 18,000 divided by 6 = 3,000 per year). However, the scenario specifies the reducing balance method with a 20% factor, not straight-line. The reducing balance method produces a different depreciation pattern, especially in the first year.
- ✓
USD 4,000
Why this is correct
The reducing balance method with a factor of 20% calculates depreciation on the net book value (acquisition cost minus accumulated depreciation) for the first year. Since no depreciation has been taken, the net book value is USD 20,000. 20% of 20,000 equals USD 4,000. The salvage value does not reduce the basis for the reducing balance method in the first year; it only limits depreciation over the asset's life.
- ✗
USD 3,600
Why it's wrong here
This amount equals 20% of the depreciable basis (20,000 - 2,000 = 18,000), which would be the result if the reducing balance method were applied to the net book value minus salvage. However, the reducing balance method in Dynamics 365 Finance applies the factor to the net book value after subtracting prior depreciation, not directly to the depreciable basis. Therefore, this calculation is incorrect for the first year.
- ✗
USD 2,000
Why it's wrong here
This is the salvage value, not a depreciation amount. The salvage value is the estimated residual value at the end of the asset's useful life and is used to limit total depreciation. It is not the first-year depreciation expense under the reducing balance method. The system would not calculate the first-year depreciation as the salvage value.
About these practice questions
One of 211 original MB-310 practice questions on Courseiva, each with a full explanation and wrong-answer analysis — not exam dumps or protected exam content. Learn why practice questions differ from exam dumps →
JA
Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official Microsoft exam blueprint
This MB-310 practice question is part of Courseiva's free Microsoft certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the MB-310 exam.