Section 2: 30–40%2D
Property, Plant, and Equipment
Exam Insight
Depreciation questions almost always involve partial years or method switches. The AICPA trap: SYD (sum-of-years-digits) with a mid-year purchase - you must prorate the first year's fraction, then the second year straddles two SYD fractions. For impairment, know the two-step test: first compare carrying value to undiscounted cash flows (step 1), then measure the loss at fair value (step 2). Candidates who skip step 1 and go straight to fair value get the wrong answer.
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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