Question

Estimating Useful Life and Percent Used Up
The property and equipment footnote from Tesla follows. Assume that 25% of the amount classified as "Land and buildings" pertains to the cost of the Land.

Property and Depreciation Our property, plant and equipment, net, consists of the following (in thousands):

December 31	2018	2017
*Weighted averages
Machinery, equipment, vehicles and office furniture	$6,328,966	$4,251,711
Tooling	1,397,514	1,255,952
Leaseholder improvements	960,971	789,751
Land and buildings	4,047,006	2,517,247
Computer equipment, hardware and software	487,421	395,067
Construction in progress	807,297	2,541,588
	14,029,175	11,751,316
Less accumulated depreciation	(2,699,098)	(1,723,794)
Total	$11,330,077	$10,027,522

Depreciation expense during the years ended December 31, 2018, 2017, and 2016 was $1.11 billion, $769.3 million, and $477.3 million, respectively.

a. Compute the average useful life of Tesla’s depreciable assets at year-end 2018. Round answer to one decimal place.
Answer

years

b. Estimate the percent used up of Tesla’s depreciable assets at year-end 2018. Round answer to one decimal place (ex: 0.2345 = 23.5%)
Answer

%

Answer 1

1)Computation of  the average useful life of Tesla’s depreciable assets at year-end 2018.

Estimated Useful Life= Depreciable Asset Cost/ Depreciation Expense

=12210.127/2356.6= 5.2 Years

Depreciable Asset Cost
Particulars	Cost(in millions)
Machinary equipment etc	6328966
Tooling	1397514
Leaseholder Improvement	960971
Land and Building (4,047,006-25%)	3035255
Computer equipment, hardware and software	487421
Total	12210.127

Depreciation Expense
Particulars	Expense (in million)
2016	477.3
2017	769.3
2018	1110
Total	2356.6

2 Calculation of Percent Used Up

Percent Used Up=Accumulated Depreciation/ Depreciable Asset Cost

=2699.10(as per 2018)/12210.13

=22.10%