Cannington, Inc., designs, manufactures, and markets personal computers and rela

Question

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

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

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

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)

Explanation / Answer

a.

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.

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

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