Question

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.
Answer: _____ years

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%)
Answer _____ %

Answer 1

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%