HAC Healthcare Fixed Assets & Depreciation 2

Question 1

The double-declining balance (DDB) method calculates annual depreciation by applying which rate to the asset's net book value?

Accepted Answer

Twice the straight-line rate

Answer

DDB uses twice the straight-line rate applied to the remaining net book value each year, accelerating depreciation in early years.

Question 2

A hospital disposes of medical equipment with a net book value of $50,000 for $30,000 cash. What is the financial statement impact?

Accepted Answer

Loss of $20,000

Answer

The proceeds ($30,000) are less than the net book value ($50,000), resulting in a $20,000 loss on disposal.

Question 3

Under ASC 360, an impairment loss on a long-lived healthcare asset is recognized when:

Accepted Answer

The carrying amount exceeds undiscounted future cash flows

Answer

ASC 360 triggers an impairment test when events occur indicating possible impairment; a loss is recognized when carrying amount exceeds undiscounted future cash flows.

Question 4

Under ASC 842, which type of lease requires the lessee to recognize a right-of-use asset and a lease liability on the balance sheet with interest and amortization recognized separately?

Accepted Answer

Finance lease

Answer

A finance lease under ASC 842 is treated similarly to a capital lease — the lessee capitalizes the asset and liability and records interest expense plus amortization separately.

Question 5

A hospital acquires a building for $5,000,000. The land is independently appraised at $500,000. What amount is subject to depreciation?

Accepted Answer

$4,500,000

Answer

Land is not depreciated; only the building portion ($5,000,000 − $500,000 = $4,500,000) is depreciable.

(HAC) Healthcare Accounting Certification Practice Test

(HAC) Healthcare Accounting Certification Practice Test

HAC Healthcare Fixed Assets & Depreciation 2