In: Accounting
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
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.