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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Book value of fixed assets

Apple Inc. designs, manufactures, and markets personal computers and related software. Apple also manufactures and distributes music players (iPod) and mobile phones (iPhone) along with related accessories and services, including online distribution of third-party music, videos, and applications. The following information was taken from a recent annual report of Apple:

Property, Plant, and Equipment (in millions):

Current Year Preceding Year
Land and buildings $ 6,956 $ 4,863
Machinery, equipment, and internal-use software 37,038 29,639
Other fixed assets 5,263 4,513
Accumulated depreciation and amortization (26,786) (18,391)

a. Compute the book value of the fixed assets for the current year and the preceding year and explain the differences, if any.

b. Would you normally expect Apple's book value of fixed assets to increase or decrease during the year? Why?

a.

To determine

Fixed Assets: It refers to the long-term assets having a useful life of more than a year which is, acquired by a company to be used in its business activities, for generating revenue. Examples of fixed assets are Plant, Property, Equipment, Land, and Buildings.

To compute: the book value of the fixed assets for the current year and the preceding year.

Explanation

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

Particulars Current Year  in millions ($) Preceding Year in millions ($)
Cost of the fixed assets:
Land and buildings 6,956 4,863
Machinery, equipment, and internal-use software 37,038 29,639
Other fixed assets 5,263 4,513
Total fixed assets 49,257 39,015
Less: Accumulated depreciation and amortization (26,786) (18,391)
Book Value 22,471 20,624

Table (1)

The book value has increased from the preceding year to the current year by $1,847million($22,471$20,624)

b.

To determine

To explain: whether it is normally expected that Company A’s book value of fixed assets would increase or decrease during the year.

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