CCIFP Construction Equipment and Asset Management 1

Question 1

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

Accepted Answer

Straight-line depreciation

Answer

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

Question 2

Under GAAP, heavy construction equipment is classified on the balance sheet as:

Accepted Answer

Property, plant and equipment

Answer

Heavy equipment used in operations is reported as property, plant and equipment (PP&E) on the balance sheet.

Question 3

A construction company purchases equipment for $150,000 with a salvage value of $15,000 and a 5-year useful life. What is the annual straight-line depreciation?

Accepted Answer

$27,000

Answer

Annual depreciation = ($150,000 - $15,000) / 5 = $135,000 / 5 = $27,000.

Question 4

Which equipment cost classification represents routine maintenance to keep equipment in working order?

Accepted Answer

Revenue expenditure

Answer

Routine maintenance costs that do not extend useful life or improve performance are revenue expenditures expensed immediately.

Question 5

The double declining balance method applies which rate to book value each year?

Accepted Answer

2 times the straight-line rate

Answer

Double declining balance uses twice the straight-line depreciation rate applied to the remaining book value each period.

CCIFP - Certified Construction Industry Financial Professional Practice Test

CCIFP - Certified Construction Industry Financial Professional Practice Test

CCIFP Construction Equipment and Asset Management 1