CCIFP Construction Equipment and Asset Management 3

Question 1

A construction company trades in old equipment (book value $20,000) for new equipment (list price $80,000) and receives a $25,000 trade-in allowance. What is the recorded cost of the new equipment?

Accepted Answer

$55,000

Answer

The new equipment is recorded at the cash paid plus the fair value given up: $80,000 - $25,000 = $55,000.

Question 2

Which costing approach charges equipment ownership costs (depreciation, insurance, taxes) to projects based on time on-site?

Accepted Answer

Ownership cost allocation

Answer

Ownership cost allocation distributes fixed equipment ownership costs to projects proportionally based on time the equipment is assigned.

Question 3

An impairment loss on construction equipment must be recognized when:

Accepted Answer

The carrying amount exceeds the recoverable amount

Answer

Under ASC 360, an impairment loss is recorded when the carrying value of an asset exceeds its recoverable (fair) value.

Question 4

What distinguishes a capital expenditure from a revenue expenditure for construction equipment?

Accepted Answer

Capital expenditures extend useful life or improve capacity; revenue expenditures maintain current condition

Answer

Capital expenditures are capitalized because they extend useful life or enhance capability, while revenue expenditures are expensed as routine maintenance.

Question 5

In construction equipment lease-versus-buy analysis, which factor favors leasing?

Accepted Answer

Desire to avoid obsolescence risk

Answer

Leasing transfers obsolescence risk to the lessor, making it favorable when equipment technology changes rapidly.

CCIFP - Certified Construction Industry Financial Professional Practice Test

CCIFP - Certified Construction Industry Financial Professional Practice Test

CCIFP Construction Equipment and Asset Management 3