End of Year 2, PP&E decreases by $90 in total. Which statement best describes this change?

End of Year 2, PP&E decreases by $90 in total. Which statement best describes this change?

• A. Decrease by $90
• B. Increase by $90
• C. Decrease by $100
• D. Decrease by $80

Answer: (A)

Net PP&E on the balance sheet is shown as the cost of property, plant, and equipment less accumulated depreciation. When depreciation for the year is 90, accumulated depreciation increases by 90, so the net PP&E value falls by 90. That’s why the statement that PP&E decreases by 90 best describes the change. It reflects a non-cash expense that reduces the book value of PP&E through depreciation, rather than a cash outflow or a purchase that would raise PP&E. The other options would imply different events (like new acquisitions increasing PP&E or a larger/smaller change due to impairment or disposal), which aren’t indicated by the given end-of-year decrease.

Net PP&E on the balance sheet is shown as the cost of property, plant, and equipment less accumulated depreciation. When depreciation for the year is 90, accumulated depreciation increases by 90, so the net PP&E value falls by 90. That’s why the statement that PP&E decreases by 90 best describes the change. It reflects a non-cash expense that reduces the book value of PP&E through depreciation, rather than a cash outflow or a purchase that would raise PP&E. The other options would imply different events (like new acquisitions increasing PP&E or a larger/smaller change due to impairment or disposal), which aren’t indicated by the given end-of-year decrease.