CAT Inventory & Asset Management Flashcards
6 cards from real CAT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CAT Inventory & Asset Management flashcards as text
Under US GAAP, what is the straight-line depreciation method?
Answer: Equal depreciation expense each year over the asset's useful life
Straight-line depreciation spreads the depreciable cost evenly across all years of the asset's estimated useful life.
Which depreciation method produces higher depreciation expense in the early years of an asset's life?
Answer: Double-declining balance
Double-declining balance applies double the straight-line rate to the asset's declining book value, front-loading depreciation expense.
What is the book value of a fixed asset?
Answer: Original cost minus accumulated depreciation
Book value (also called carrying value) equals the asset's historical cost reduced by all depreciation charged since acquisition.
What journal entry is made when a company purchases equipment for cash?
Answer: Debit Equipment, Credit Cash
Buying equipment for cash increases a fixed asset (debit) and decreases cash (credit), following the basic asset exchange pattern.
When a fully depreciated asset is sold for a gain, which account is credited for the proceeds?
Answer: Cash
The cash received from the sale is recorded as a debit to Cash; the gain is recognized in a separate Gain on Sale of Asset account.
What does the term 'capital expenditure' (CapEx) mean in asset management?
Answer: Spending that adds to or extends the useful life of an asset and is capitalized on the balance sheet
Capital expenditures are significant asset purchases or improvements that provide benefits beyond one year and are recorded as assets rather than expenses.