HAC Healthcare Fixed Assets & Depreciation

Question 1

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

Accepted Answer

Straight-line

Answer

The straight-line method divides depreciable cost evenly over the asset's useful life, producing a constant annual expense.

Question 2

Under GAAP, which of the following costs is expensed rather than capitalized as part of a fixed asset's cost?

Accepted Answer

Staff training costs

Answer

Staff training costs are period costs expensed as incurred; they do not add to the asset's cost basis under GAAP.

Question 3

A hospital purchases an MRI machine for $2,000,000 with a 10-year useful life and $200,000 salvage value. What is the annual straight-line depreciation?

Accepted Answer

$180,000

Answer

Annual depreciation = ($2,000,000 − $200,000) ÷ 10 = $180,000.

Question 4

Which term describes the minimum dollar amount at which an expenditure is recorded as a fixed asset rather than an immediate expense?

Accepted Answer

Capitalization threshold

Answer

A capitalization threshold (or policy) sets the minimum cost above which an item is capitalized and depreciated rather than expensed.

Question 5

The Modified Accelerated Cost Recovery System (MACRS) is primarily used for which purpose in healthcare accounting?

Accepted Answer

Federal income tax depreciation

Answer

MACRS is the depreciation system prescribed by the IRS for federal income tax purposes and is not used for GAAP or Medicare cost reports.

(HAC) Healthcare Accounting Certification Practice Test

(HAC) Healthcare Accounting Certification Practice Test

HAC Healthcare Fixed Assets & Depreciation