Question

Estimating Useful Life and Percent Used Up The property and equipment footnote from the Deere &...

Estimating Useful Life and Percent Used Up
The property and equipment footnote from the Deere & Company Equipment and Operations segment follows.
Property and Depreciation A summary of property and equipment at October 31 follows.

Useful Lives*
Property and Equipment (\$ millions) (Years) 2015 2014
*Weighted averages
Land \$114 \$120
Buildings and building equipment 23 2,572 3,037
Machinery and equipment 11 4,611 5,089
Dies, patterns, tools, etc 8 1,567 1,552
All other 5 875 889
Construction in progress 345 530
Total at cost 10,084 11,217
Less accumulated depreciation 5,846 5,694
Total \$4,238 \$5,523

Total property and equipment additions in 2015, 2014 and 2013 were \$666 million, \$1,016 million and \$1,158 million, and depreciation was \$692 million, \$696 million and \$637 million, respectively.

a. Compute the average useful life of Deere’s depreciable assets at year-end 2015.

Round answer to one decimal place.

b. Estimate the percent used up of Deere’s depreciable assets at year-end 2015.

Round answer to one decimal place (ex: 0.2345 = 23.5%)

a)

Computation of  the average useful life of Deere’s depreciable assets at year-end 2015:

here, Land is not a depreciable asset because its useful life is unlimited. remaining assets have useful life.

cost of depreciable assets in 2015 = 2,572+4,611+1,567+875

=9625 million

here, depereciation in 2015 = 692 million

Estimated useful life in 2015 = Total cost of depreciable assets / Depreciation amount

=9625/692

=13.9years

b)

Estimation of  the percent used up of Deere’s depreciable assets at year-end 2015=  (Accumulated depreciation / Cost of depreciable assets)*100

= (5,846/9625)*100

=60.7%

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