Asset Management Asset Valuation and Accounting

Question 1

Which depreciation method allocates an equal amount of expense each year over the asset's useful life?

Accepted Answer

Straight-line depreciation

Answer

Straight-line depreciation divides the asset's cost minus salvage value equally across its useful life.

Question 2

What term describes the cost to replace an existing asset with a new asset of equivalent functionality?

Accepted Answer

Replacement cost

Answer

Replacement cost is the amount required to replace an existing asset with a new one of similar capability.

Question 3

Which accounting standard governs the recognition and measurement of property, plant, and equipment for US public companies?

Accepted Answer

ASC 360

Answer

ASC 360 (Property, Plant, and Equipment) provides guidance on recognition, measurement, and impairment of long-lived assets.

Question 4

What is the term for the estimated amount an asset can be sold for at the end of its useful life?

Accepted Answer

Salvage value

Answer

Salvage value (also called residual value) is the expected proceeds from disposing of an asset after its useful life.

Question 5

An asset impairment test is triggered when which condition is met?

Accepted Answer

Carrying amount may not be recoverable

Answer

Under ASC 360, an impairment test is required when events indicate the carrying amount may not be recoverable from future cash flows.

Asset Management Practice Test