Intel is a global leader in manufacturing semiconductors. Computer chip manufacturing is very capital intensive. In addition, the production processes in computer chip manufacturing require very sophisticated technology, and the technology changes rapidly, particularly with each new generation of chip. As a consequence, productive manufacturing assets in the chip industry tend to have relatively short useful lives. The following summary information relates to Intel's property, plant, and equipment for Year 3 and 4.
Use the following data for Intel to project property, plant, and equipment; depreciation expense; and accumulated depreciation for Year +1. Assume that Intel depreciates all property, plant, and equipment using the straight-line depreciation method and zero salvage value. Assume Intel does not sell or retire any property, plant, and equipment during Year +1.
a. Compute the average useful life Intel used in Year 4 for depreciation.
b. Project total depreciation expense for Year +1 using the following steps: (1) project depreciation expense for Year +1 on existing property, plant, and equipment
at the end of Year 4; (2) project depreciation expense in Year +1 on capital expenditures in Year +1, assuming $4,000 in expenditures on depreciable assets in Year +1 and assuming that Intel takes a full year of depreciation in the first year of service; and (3) sum the results of parts (1) and (2) to obtain total depreciation expense for Year +1.
c. Project the Year +1 ending balance in property, plant, and equipment, both at cost and net of accumulated depreciation.
This question was answered on: Jul 11, 2017
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