0.10 Projecting Property, Plant, and Equipment. LO 10-2 Intel is a global leader in manufacturing microprocessors, which

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0.10
Projecting Property, Plant, and Equipment.
LO 10-2
Intel is a global leader in manufacturing
microprocessors, which is very capital-intensive. The production
processes in microprocessor manufacturing require sophisticated
technology, and the technology changes rapidly, particularly with
each new generation of microprocessor. As a consequence, production
and manufacturing assets in the microprocessor industry tend to
have relatively short useful lives. Assume the following
hypothetical information relates
to Intel’s property, plant, and
equipment for 2021 and 2022:
Required
Assume that Intel depreciates all
property, plant, and equipment using the straight-line depreciation
method and zero salvage value. Assume
that Intel spends $6,000 million on new
depreciable assets in Year +1 and does not sell or retire any
property, plant, and equipment during Year +1.
Compute the average useful life (in years, rounded to two
decimals) that Intel used for
depreciation in 2022.
Project total depreciation expense for Year +1 using the
following steps:
Project depreciation expense for Year +1 on existing property,
plant, and equipment at the end of 2022.
Project depreciation expense on capital expenditures in Year +1
assuming that Intel takes a full year of
depreciation in the first year of service.
Sum the results of (1) and (2) to obtain total depreciation
expense for Year +1.
Project the Year +1 ending balance in property, plant, and
equipment, both at cost and net of accumulated depreciation.