Solved: Intel is a global leader in manufacturing

microprocessors which

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. The following summary information relates to Intel’s property, plant,
and equipment for 2007 and 2008:

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 on new
depreciable assets in Year +1 and does not sell or retire any property, plant, and equipment
during Year +1.
a. Compute the average useful life that Intel used for depreciation in 2008.
b. Project total depreciation expense for Year +1 using the following steps:
(i) Project depreciation expense for Year +1 on existing property, plant, and equipment at the
end of 2008;
(ii) Project depreciation expense on capital expenditures in Year +1 assuming that Intel takes a
full year of depreciation in the first year of service; and
(iii) Sum the results of (i) and (ii) to obtain total depreciation expense for Year +1.
c. Project the Year +1 ending balance in property, plant, and equipment, both at cost and net of
accumulated depreciation.

Intel is a global leader in manufacturing microprocessors which

ANSWER
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