Please show all work Estimating Useful Life and Percent Used Up (LO3) The proper
ID: 2711023 • Letter: P
Question
Please show all work
Estimating Useful Life and Percent Used Up (LO3) The property and equipment section of the Abbott Laboratories 2012 balance sheet follows P6-42. abbotl laboratorles (ABT) December 31 2011 604,462 633,917 $648,988 2012 2010 Property and equipment, at cost ($ thousands) Land Buildings Equipment Construction in progress 4,259,240 4,467,387 4,334,236 ...13,110,833 12,216,388 11,813,618 577,460 954,352 698,873 18,928,887 18,016,565 17,374,302 Less: accumulated depreciation and amortization Net property and equipment 10,865,840 10,142,610 9,403,346 $ 8,063,047 $ 7,873,955 $7,970,956 O2015 Cambriage Basiness Publishers For the Persanl ve Cesar Riv alem O2015 Cambriage Basiness Publishers For the Persanl ve Cesar Riv alem 5 Module 6 Asset Recognition and Operating Assets The company also provides the following disclosure relating to the useful lives of its depreciable assets Property and Equipment Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. The following table shows estimated useful lives of property and equipment: Classification Estimated Useful Lives Buildings Equipment 10 to 50 years (average 27 years) 3 to 20 years (average 11 years)Explanation / Answer
Answer :
Estimated Useful Life of Equipment and Machinery : opening balance of Year 2012 / ( Change in accumulated Depreciation from 2011-2012)
= 12216388/ (10865840 - 10142610)
= 16.89 or 17 years
Estimated life of buildings = value of property at begining of year / Depreciation applied during year
= 5101304 / (1363673-723230)
= 7.96 or 8 years
As compared to the useful life provided in the footnotes the useful life being used in calculation is
a) in case of equipment is higher than provided in notes
b) in case of building is less than provided in the notes
B) Estimated percentage used up = 10865840/13110833
= 82.87 %
The company has already depreciatde approx 83 % of the assets on its book which means that the company will soon be in need of significant amount of capital ependitures, this also signifies that the company does not spend much amount on replenishing the capital assets that it is using up over the years.
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