Question
In: Accounting
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
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