HW No. 5
Answer the following questions from the textbook:

E6 - 35
Estimating Useful Life and Percent Used Up
The property and equipment footnotes from the Deere & Company balance sheet follows
The property and Depreciation A summary of property and equipment at October 31 follows:

Property and Equipment (millions) | Useful Lives (years) | 2010 | 2009 | Land | | $113 | $1,166 | Buildings and building equipment | 23 | 2,226 | 2,144 | Machinery and equipment | 11 | 3,972 | 3,826 | Dies, patterns, tool, etc. | 7 | 1,105 | 1,081 | All other | 5 | 685 | 672 | Construction in process | | 478 | 362 | Total at cost | | 8,579 | 8,501 | Less accumulated depression | | 4,856 | 4,744 | Total | | $3,723 | $3,457 |
Property and equipment is stated at cost less accumulated depreciation. Total property and equipment additions in 2010, 2009 and 2008 were $802 million, $798 million and $1,147 million and depreciation was $540 million, $513 million and $467 million, respectively.
a. Compute the estimated useful life of Deere’s depreciable assets at year-end 2010. (Hint: Exclude land and construction in process.) How does this estimate compare with the useful lives reported in Deere’s footnote disclosure?
b. Estimate the percent used up of Deere’s depreciable assets at year-end 2010. How do you interpret this figure?

E6 – 37
Computing and Assessing Plant Asset Impairment
On July 1, Zeibart Company purchases equipment for $225,000. The equipment has an estimated useful life of 10 years and expected salvage value of $25,000. The company use straight-line depreciation. Four years later, economic factors cause the fair value of the equipment to decline to $90,000. On this date, Zeibart examines the equipment for impairment and estimates $125,000 in undiscounted expected cash inflows this equipment. a. Compute the annual depreciation expense