Question

In: Accounting

Cannington, Inc., designs, manufactures, and markets personal computers and related software. The following information was taken...

Cannington, Inc., designs, manufactures, and markets personal computers and related software. The following information was taken from a recent annual report of Cannington industries:

Property, Plant, and Equipment (in millions):
Current Year Preceding Year
Land and buildings $518,130 $300,515
Machinery, equipment, and internal-use software 492,224 388,598
Other fixed assets related to leases 626,937 471,498
Accumulated depreciation and amortization (658,025) (549,218)

a. Compute the book value of the fixed assets for the current year and the preceding year.

Current year book value $
Preceding year book value $

A comparison of the book values of the current and preceding years indicates that they increased . A comparison of the total cost and accumulated depreciation reveals that Cannington purchased $ million of additional fixed assets, which was offset by the additional depreciation expense of $ million taken during the current year.

b. Would you normally expect the book value of fixed assets to increase or decrease during the year?
Increase

Solutions

Expert Solution

Current Year Preceding Year Increase (Decrease)
Land and buildings 518130 300515
Machinery, equipment, and internal-use software 492224 388598
Other fixed assets related to leases 626937 471498
Total cost 1637291 1160611 476680
Accumulated depreciation and amortization -658025 -549218 -108807
Book value 979266 611393 367873

a.

Current year book value $       979,266
Preceding year book value $       611,393

A comparison of the book values of the current and preceding years indicates that they increased. A comparison of the total cost and accumulated depreciation reveals that Cannington purchased $476680 million of additional fixed assets, which was offset by the additional depreciation expense of $108807 million taken during the current year.

b. Decrease.

The book value would normally decrease during the year due to the depreciation expense charged for the year.


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