Construction Equipment and Asset Management Flashcards

An equipment lease that transfers substantially all ownership risks and rewards to the lessee is classified as a:

Answer: Finance lease

Under ASC 842, a lease that transfers ownership benefits and risks is classified as a finance lease and recorded on the balance sheet.

Which metric measures how efficiently a construction company uses its equipment to generate revenue?

Answer: Equipment utilization rate

Equipment utilization rate (hours used / hours available) measures how productively equipment is deployed on projects.

Under ASC 842, operating leases with terms greater than 12 months must be recognized on the balance sheet as:

Answer: A right-of-use asset and lease liability

ASC 842 requires lessees to record a right-of-use asset and corresponding lease liability for operating leases over 12 months.

What is the primary purpose of an equipment fleet management program in a construction firm?

Answer: To optimize equipment deployment, maintenance, and cost

Fleet management programs track utilization, schedule preventive maintenance, and allocate equipment costs to maximize ROI.

Which IRS provision allows businesses to immediately expense the full cost of qualifying equipment in the year of purchase?

Answer: Section 179 deduction

IRC Section 179 allows businesses to deduct the full purchase price of qualifying equipment up to an annual limit rather than depreciating it over time.

The Modified Accelerated Cost Recovery System (MACRS) is used for:

Answer: Federal income tax depreciation

MACRS is the mandatory depreciation method prescribed by the IRS for calculating tax depreciation on business assets.