Reference no: EM132197159

Question - A recent annual report for Naomi reported that the (gross) balance of property, plant, and equipment at the end of the current year was $16,774 million. At the end of the previous year it was $15,667 million. During the current year, the company bought $2,118 million worth of new equipment. The balance of accumulated depreciation at the end of the current year was $8,146 million and at the end of the previous year was $7,654 million. Depreciation expense for the current year was $1,181 million. The annual report does not disclose any gain or loss on the disposition of property, plant, and equipment, so you may assume the amount was zero.

Required:

a. What was the gross book value of the assets disposed?

b. What amount of proceeds did Naomi receive when it sold property, plant, and equipment?

c. Assume Naomi uses straight-line depreciation and that depreciation expense is calculated based on the balance of property, plant and equipment at the beginning of the year. What is your estimate of the average expected life for Naomi depreciable assets at the beginning of the year? Explain.

d. Given your answer to part c above, what is your estimate of the average age of Naomi's depreciable assets at the beginning of the year? Explain.