Property, plant and equipment
Area 2: Select Balance Sheet Accounts (30-40%)
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Topics
- Capitalization and depreciation methods
- Impairment of long-lived assets
- Assets held for sale
Study Frameworks
Straight-Line Depreciation
(Cost − Salvage Value) / Useful Life
Double-Declining Balance
Book Value × (2 / Useful Life)
Ignore salvage value until BV reaches salvage
Sum-of-Years-Digits
(Cost − Salvage) × (Remaining Life / Sum of Years Digits)
Sum of years digits = n(n+1)/2
Asset Retirement Obligation (Initial)
ARO Liability = Estimated Future Cost / (1 + r)^n
Present value of estimated retirement cost using credit-adjusted risk-free rate (r) over n periods