Asset Management Asset Valuation and Accounting 2

Question 1

What is 'net book value' of an asset?

Accepted Answer

Original cost minus accumulated depreciation

Answer

Net book value equals the original acquisition cost of an asset minus all accumulated depreciation recorded to date.

Question 2

Which method of depreciation results in higher expense in the early years of an asset's life?

Accepted Answer

Double declining balance

Answer

The double declining balance method applies twice the straight-line rate to the declining book value, front-loading depreciation.

Question 3

When an asset is sold for more than its net book value, the difference is recorded as:

Accepted Answer

Gain on disposal

Answer

A gain on disposal is recognized when sale proceeds exceed the asset's net book value at the time of sale.

Question 4

Which type of expenditure extends an asset's useful life and is capitalized rather than expensed?

Accepted Answer

Capital improvement

Answer

Capital improvements that extend useful life or add new capability are capitalized and depreciated over the remaining life.

Question 5

What is the primary purpose of an asset register in financial asset management?

Accepted Answer

Record all fixed assets with cost, depreciation, and location

Answer

An asset register is a detailed inventory of fixed assets that records acquisition cost, depreciation, location, and disposal details.

Asset Management Practice Test