Section 2: 30–40%2D
Property, Plant, and Equipment
Exam insight
Depreciation questions almost always throw in a partial year or a method switch. The classic AICPA trap is SYD (sum-of-years-digits) with a mid-year purchase: you prorate the first year's fraction, and then the second year straddles two SYD fractions. For impairment, lock in the two-step test: step 1 compares carrying value to undiscounted cash flows, and step 2 measures the loss at fair value. Skip step 1 and jump straight to fair value, and you get the wrong answer.
CPA Exam Lab is an independent study resource and is not affiliated with, endorsed by, or sponsored by the AICPA® or NASBA. Practice questions are original content created for study purposes. “CPA” is a registered trademark of the AICPA.
What AICPA wants you to know
- 1Determine the initial cost basis of PP&E (what to capitalize)
- 2Calculate depreciation under straight-line, DDB, and sum-of-years-digits
- 3Record disposal of PP&E (gain/loss calculation)
- 4Apply impairment testing rules (recoverability test, then measurement)
- 5Distinguish between capital expenditures and repairs/maintenance