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The following property and equipment section was obtained from a recent Abott Laboratories 10-K. Property and...

The following property and equipment section was obtained from a recent Abott Laboratories 10-K. Property and equipment at cost Land…………………………………………………………………………………………………… $1,291,500 Buildings……………………………………………………………………………………………….. $2,655,400 Equipment…………………………………………………………………………………………….. $8,813,500

TOTAL COST $12,760,400

Less accumulated depreciation and amortization………………………………… (6,757,300)

Net Book Value …………………..………………………………………………………………… .. $6,003,100

In addition depreciation expense was $573,445.

a. Estimate the Property and equipment percent Used up.

b. Estimate the Useful life on average for the depreciable assets

Solutions

Expert Solution

Answer:

part A

Percentage usedup of an asset is determined by calculating the ratio between accumulated depreciation and total fixed asset.

Since land is not a depreciable asset ,cost of land is excluded for calculating the ratio.

Usage ratio= accumulated depreciation÷ fixed asset

Total fixed asset= 12760400

Cost of land = 1291500

Fixed asset excluding land = 12760400-1291500= 11468900

Accumulated depreciation= 6757300

Usage ratio = 6757300÷11468900 = 58.9%

part b

computation of useful life of the depreciable asset:

Depreciation expense = total depreciable asset÷ useful life

Therefore useful life = total depreciable asset÷ depreciation expense

Depreciation expense= 573445

Total depreciable asset= 2655400+8813500= 11468900

Useful life = 11468900÷ 573445 = 20 years

Answer is based on the assumption that straight line Depreciation method is followed.

SUMMARY

A) Usage of asset= 58.9%

B) useful life= 20 years

ekkarill92 answered 1 year ago
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