212
E7–18
a. Property, Plant, and Equipment (in millions):
Year 2 Year 1
Land and buildings ……………………………………………. $ 2,439 $ 2,059
Machinery, equipment, and internal-use software .. 15,743 6,926
Office furniture and equipment …………………………... 241 184
Other fixed assets related to leases ……………………. 3,464 2,599
$21,887 $11,768
b. The book value of fixed assets should normally increase during the year.
E7–19
213
PROBLEMS
P7–1
1.
Land Other
Item Land Improvements Building Accounts
a. $ 80,000
b. $ 30,000
214
P7–2
Depreciation Expense
a. Straight- b. Double-
Line Declining-Balance
Year Method Method
Calculations:
Straight-line method:
Double-declining-balance method:
P7–3
a. Straight-line method:
b. Double-declining-balance method:
215
P7–4
1.
Accumulated
Depreciation Depreciation, Book Value,
Year Expense End of Year End of Year
a. 1 $32,500* $ 32,500 $ 107,500
2.
Balance Sheet
Statement of Assets =Liabilities +Stockholders’ Equity Income
Cash Flows Acc. Statement
Depr.— Retained
Cash + Equip. –Equip. = Earnings
3.
Balance Sheet
Statement of Assets =Liabilities +Stockholders’ Equity Income
Cash Flows Acc. Statement
Depr.— Retained
Cash + Equip. –Equip. = Earnings
216
P7–5
2. a.
Balance Sheet
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Retained
Statement
Goodwill
=
Earnings
b.
Balance Sheet
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Retained
Statement
=
Earnings
c.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Acc.
Retained
Statement
– Depletion
=
Earnings
Dec. 31.
Depletion exp.
217
METRIC-BASED ANALYSES
MBA 7–1
Liquidity Profitability
Free Cash Flow Asset Turnover
MBA 7–2
1.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
– Acc. Depr.—
Retained
Statement
Equip.
=
Earnings
2.
Liquidity Profitability
Free Cash Flow Asset Turnover
MBA 7–3
Liquidity Profitability
Free Cash Flow Asset Turnover
218
MBA 7–4
Liquidity Profitability
Free Cash Flow Asset Turnover
MBA 7–5
MBA 7–6
1. Sales (revenue) ………………………………………….. $18,605