Dmp3e Ch08 Solutions 08.12.10 Final

7/27/2019 Dmp3e Ch08 Solutions 08.12.10 Final

1/22

Chapter 8

Reporting and Analyzing Long-TermOperating Assets

Learning Objectives coverage by question

Mini-exercises

Exercises Problems Cases

LO1 Describe and distinguish

between tangible and intangibleassets. 17 31 38, 39

LO2 Determine which costs tocapitalize and report as assetsand which costs to expense.

11,17 22 38, 39

LO3 Apply different depreciationmethods to allocate the cost of assetsover time.

12, 13, 16, 1822, 23, 24,

25, 26, 27, 28

LO4 Determine the effects ofasset sales and impairments onfinancial statements.

14, 15 22, 24, 26, 35 36, 38, 39 40 42

LO5 Describe the accountingand reporting for intangibleassets.

17, 21 31, 34 37, 38 42

LO6 Analyze the effects oftangible and intangible assets on

key performance measures.

20, 21 29, 30, 33 41 42

LO7 Explain the accounting foracquisition and depletion of naturalresources.

19 32

Cambridge Business Publishers, 2011

Solutions Manual, Chapter 8 8-1


2/22


3/22

Q8-7. A PPE asset is considered to be impaired when the sum of the undiscountedexpected cash flows to be derived from the asset is less than its currentbook value.

An impairment loss is calculated as the difference between the asset's bookvalue and its current fair market value.

Q8-8. Research and development costs must be expensed under GAAP unlessthey have alternative future uses. Equipment relating to a specificresearch project with no alternative use would, therefore, be expensedrather than capitalized and subsequently depreciated.Accounting standard-setters have justified this expense as incurredtreatment for R&D costs since the outputs from research and developmentactivities are uncertain and there are, therefore, no expected cash flowsagainst which to match any future depreciation expense.

Q8-9. The difficulty with amortizing intangible assets is estimating the useful life.For some intangibles, the useful life is limited and can be easily estimated.

However, some intangibles have an indefinite life. This means that theuseful life of the intangible is long and cannot be determined with anyreasonable degree of accuracy. Under these circumstances, it is notappropriate to amortize the asset until the useful life can be determined.

Q8-10. Goodwill arises whenever a company acquires another company and thepurchase price is greater than the fair value of the identifiable assetsacquired. The amount of goodwill is the difference between the purchaseprice and the value assigned to the net assets of the acquired company. Itis recorded as a long-term asset in the balance sheet.

Since goodwill is assumed to have an indefinite life, it is not amortized.

The only time that goodwill might affect the income statement is if it isdetermined that its value is impaired. In that case, an impairment loss isrecorded in the income statement and the value of the goodwill asset onthe balance sheet is reduced.




4/22


5/22

...........................................................................................

...........................................................................................

...........................................................................................Loss on sale of furniture and fixtures (+E, -SE) ..... ...............................................................................................

4,500

Furniture and fixtures (-A) ................................ 40,000

M8-14continued.b.

Balance Sheet Income Statement

Transaction CashAsset +

NoncashAssets -

ContraAssets

= Liabi-lities +Contrib.Capital +

EarnedCapital Revenues - Expenses =

NetIncome

Sold furnitureand fixturesfor cash.

+3,500Cash

-40,000Furniture

andFixtures

-

-32,000AccumulatedDepreciation

-4,500RetainedEarnings -

+4,500Loss onSale of

Furnitureand

Fixtures

=

-4,500

M8-15 (15 minutes)

Twice the straight-line rate = 1/5 x 2 = 40%

Year 1: $75,000 x .4 = $30,000Year 2: ($75,000 - $30,000) x .4 = 18,000Year 3: ($75,000 - $30,000 - $18,000) x .4 = 10,800Total accumulated depreciation $58,800

a. Cash (+A) .......................................................................... 25,000Accumulated depreciation (-XA, +A) .............................. 58,800

Machinery ( -A) ........................................................ 75,000Gain on sale of machinery (+R, +SE) ................... 8,800

b.

Balance Sheet Income Statement

Transaction CashAsset +

NoncashAssets -

ContraAssets

= Liabi-lities +Contrib.Capital +


NetIncome

Sold machineryfor cash.

+25,000Cash

-75,000Machinery -

-58,800AccumulatedDepreciation

+8,800RetainedEarnings

+8,800Gain on Saleof Machinery

- =+8,800

M8-16 (15 minutes)

a. Straight-line depreciation

2010: ($145,800 - $5,400)/3 = $46,800; (8/12) x $46,800 = $31,200

2011: $46,800

b. Double-declining-balance depreciationPreliminary computation: Twice straight-line rate = 2 x 100%/3 = 66%




6/22

($145,800 x 66%) = $97,200

2010: (8/12) x $97,200 = $64,800

2011: ($145,800 - $64,800) x 66% = $54,000


Financial Accounting, 3rdEdition8-6


7/22

M8-17 (20 minutes)a. Under U.S. GAAP, capitalization of development costs is not allowed and all R&D

costs must be expensed. Under IFRS, development costs are capitalized if thereis the intention, feasibility and resources to bring the asset to completion, thereexists the ability to use or sell the asset to generate an economic benefit.Otherwise the costs must be expensed.

b. Direct R&D personnel costs. Legal fees and registering costs. Overhead thatcannot be allocated on a consistent basis including depreciation on equipmentand amortization of patents and licenses related to the generation of theintangible. Administration, related promotion, and training expenses.

c. Yes, impairment should be tested for annually.

M8-18 (20 minutes)a.Year Book value Depreciation rate Depreciation expense

1 $50,000 2 x = 0.5 $25,000

2 25,000 2 x = 0.5 12,5003 12,500 4,5004 8,000 0*

* No depreciation is recorded in Year 4 because the asset is depreciated to itsresidual value of $8,000.

b.Year Book value Depreciation rate Depreciation expense

1 $50,000 2 x 1/5 = 0.4 $20,0002 30,000 2 x 1/5 = 0.4 12,0003 18,000 2 x 1/5 = 0.4 7,200

4 10,800 2 x 1/5 = 0.4 4,3205 6,480 3,480*

* $3,480 of depreciation is required in Year 5 to depreciate the asset to its residualvalue of $3,000.

c.Year Book value Depreciation rate Depreciation expense

1 $50,000 2 x 1/10 = 0.2 $10,0002 40,000 2 x 1/10 = 0.2 8,0003 32,000 2 x 1/10 = 0.2 6,4004 25,600 2 x 1/10 = 0.2 5,120

5 20,480 2 x 1/10 = 0.2 4,0966 16,384 2 x 1/10 = 0.2 3,2777 13,107 2 x 1/10 = 0.2 2,6218 10,486 2 x 1/10 = 0.2 2,0979 8,389 2 x 1/10 = 0.2 1,67810 6,711 5,711*

* $5,711 of depreciation is required in Year 10 to depreciate the remaining value ofthe asset. Alternatively, DeFond could switch to straight-line depreciation in

Year 7, recording $3,027 of depreciation in Years 7 through 10.




8/22

M8-19 (15 minutes)a.

Year Barrels extracted Depletion per barrel Depletion2010 300,000 $32,000,000 / 4,000,000 = $8 $2,400,0002011 500,000 $32,000,000 / 4,000,000 = $8 $4,000,0002012 600,000 $32,000,000 / 4,000,000 = $8 $4,800,000

b.i. Oil reserve (+A) ................................................................... 32,000,000

Cash (-A) .......................................................................... 32,000,000

ii. Oil inventory (+A) ................................................................ 2,400,000Oil reserve (-A) ................................................................ 2,400,000

c.+ Oil Reserve (A) - + Oil Inventory (A) -

i. 32,000,000 i. 2,400,000

2,400,000 ii.Balance 29,600,000 Balance 2,400,000

M8-20 (15 minutes)

a.

PPE turnover rates for 2007

Texas Instruments $12,501 / [($3,609 + $3,304) / 2] = 3.62

Intel Corp. $37,586 / [($16,918 + $17,544) / 2] = 2.18

Texas Instruments turns its PPE more quickly than does Intel.

b. PPE turnover rates increase with increases in sales volume relative to the dollaramount of PPE on the balance sheet. The PPE turnover rate is often a verydifficult turnover rate to change, and typically requires creative thinking. Manycompanies are outsourcing the manufacturing process in whole or in part toothers in the supply chain. This is beneficial so long as the benefits realized bythe reduction of manufacturing assets more than offset the higher cost of the

goods as these are now purchased rather than manufactured. Another approachis to utilize long-term operating assets in partnership with another firm, say in a

joint venture.




9/22

M8-21 (15 minutes)

a. $2,786,067 / $29,527,552 = 9.4%.

Abbotts R&D expenditure level could be compared to the R&D expenditurelevel for its competitors to gain a sense of the appropriateness of its R&D

expenditures.

b. R&D costs must be expensed when incurred unless acquired depreciableassets have alternative future uses. As a result, the balance sheet does notreflect the costs incurred for long-term R&D assets. In addition, operatingexpenses are increased, thus reducing retained earnings.

($000) Balance Sheet Income Statement

Transaction CashAsset +NoncashAssets =

Liabi-lities +

Contrib.Capital +


NetIncome

R&D expenditures -2,786,067Cash =

-2,786,067Retained

Earnings

-+2,786,067R&D Expense =

-2,786,0




10/22

EXERCISES

E8-22 (15 minutes)

a. Machine (+A) .............................................................. 89,500Cash (-A) ($85,000 + $2,000 + $2,500) ........... 89,500

b. ($89,500 - $7,000) / 5 = $16,500 per year.

Depreciation expense (+E, -SE) ................................ 16,500Accumulated depreciation (+XA, -A) ............ 16,500

c. Cash (+A) ............................................................................. 12,000Accumulated depreciation (-XA, +A) ($16,500 x 4) ......... 66,000Loss on sale of machine (+E, -SE) ................................... 11,500

Machine (-A) ............................................................... 89,500

E8-23 (20 minutes)

a. Straight line:($80,000 - $5,000)/5 years = $15,000 per year

b. Double declining balance: Twice straight-line rate = 2 x 100%/5 = 40%

Year Book Value x Rate Depreciation Expense

1 $80,000 x 0.40 = $32,000

2 ($80,000 - $32,000) x 0.40 = 19,200

3 ($80,000 - $51,200) x 0.40 = 11,520

4 ($80,000 - $62,720) x 0.40 = 6,912

5 5,368 (plug)

Total $75,000




11/22

E8-24 (25 minutes)

a. 1. Cumulative depreciation expense to date of sale:[($800,000-$80,000)/10 years] x 6 years = $432,000

2. Net book value of the plane at date of sale:

$800,000 - $432,000 = $368,000

b. 1. $ 0

Cash (+A) ............................................................................... 368,000Accumulated depreciation (-XA, +A) .................................. 432,000

Plane (-A) ......................................................................... 800,000

2. Loss on sale of: $195,000 - $368,000 = $173,000


Loss on sale of plane (+E, -SE) ........................................... 173,000Plane (-A) ......................................................................... 800,000

3. Gain on sale of: $600,000 - $368,000 = $232,000


Gain on sale of plane (+R, +SE) .................................... 232,000Plane (-A) ......................................................................... 800,000

E8-25 (15 minutes)

a. Straight-line: 2010 and 2011 ($218,700 - $23,400)/6 years = $32,550

b. Double-declining-balance: twice straight-line rate = 100% x 2/6 = 33%

2010 $218,700 x 33% = $72,900

2011 ($218,700 - $ 72,900) x 33% = $48,600

E8-26 (15 minutes)

a. Depreciation expense to date of sale is [($27,200 - $2,000)/6] x 3 = $12,600.The net book value of the van is, therefore, $27,200 - $12,600 = $14,600.

b.1. 0

2. $400 gain ($15,000 - $14,600)

3. $2,600 loss ($12,000 - $14,600)




12/22

E8-27 (20 minutes)

a. Straight line: ($110,000 - $15,000) / 6 = $15,833 each year.

b. Double-declining-balance: rate = 2 x 1/6 = 1/3.

2010: $110,000 x 1/3 = $36,667

2011: ($110,000 $36,667) x 1/3 = $24,444

2012: ($110,000 $36,667 $24,444) x 1/3 = $16,296

c. Straight line: ($110,000 $15,833x2 $10,000) / 5 = $13,667 each year.

Double-declining balance: rate = 2 x 1/7 = 2/7.

($110,000 $36,667 $24,444) x 2/7 = $13,968 in 2012

E8-28 (20 minutes)

a. Straight-line: $6,000,000 / 30 = $200,000 per year each year.

b. Double-declining balance: rate = 2 x 1/30 = 1/15.

2010: $6,000,000 x 1/15 = $400,000

2011: ($6,000,000 $400,000) x 1/15 = $373,333

c. The revised depreciation rate = 2 x 1/25 = 8%

2012: ($6,000,000 $400,000 $373,333) x 8% = $418,133

E8-29 (10 minutes)

Percent depreciated = Accumulated depreciation / Asset cost

= $4,411 million / ($8,539 - $95 - $833) million = 58%

Note: We eliminate land and construction in progress from the computationbecause these assets are not depreciated.

Assuming that assets are replaced evenly as they are used up, we would expectassets to be 50% depreciated, on average. Deeres 58% is higher than this level.Our concern is that it will require higher capital expenditures in the near future toreplace aging assets.




13/22


14/22

E8-32 (15 minutes)

a. Cost of reserve: $7,200,000 + $420,000 + $50,000 = $7,670,000Residual value: $1,200,000 $800,000 = $400,000Depletion base: $7,670,000 $400,000 = $7,270,000Depletion rate: $7,270,000 / 500,000 tons = $14.54 per ton

2010: 60,000 x $14.54 = $872,400

2011: 85,000 x $14.54 = $1,235,900

b.2010: Inventory (+A) ............................................................ 872,400

Resource reserve (-A) ........................................ 872,400

2011:

Inventory (+A) ............................................................ 1,235,900

Resource reserve (-A) ........................................ 1,235,900

E8-33 (15 minutes)

a. Percent depreciated 2008: $10,070 / $11,280 = 89.3%

2007: $10,132 / $11,178 = 90.6%

b. PPET: $91,451 / [(1,210 + 1,046)/2] = 81.1 times

c. Adams assets are almost completely depreciated. This results in anextremely high percent depreciated ratio and also a very high PPE turnoverratio (PPET). Adding inventories and receivables to get all the firms netoperating asset turnover (NOAT) is more reasonable devisor. Adamsoutsources most of its manufacturing and, recognizing concerns that thesenumbers might produce, reports in its 10K that its current facilities (PPEassets) are adequate for the foreseeable future. Thus, although the ratiosmight suggest otherwise, the company does not anticipate large capitalexpenditures in the near future. Indeed this has been the case for the lastseveral years as well.




15/22

E8-34 (15 minutes)

a. The list illustrates the wide range in expenditures for R&D (as a percent ofsales) across firms. Note the large amount spent by pharmaceuticalcompanies Pfizer (16.45%) and Merck (20.15%), compared to the amount spentby Dell (1.09%). The companies in the list are paired by industry. It is

interesting to see how similar some firms in the same industry are. Forexample, Callaway Golf and Adams Golf spend almost the same percentage ofsales on R&D despite the fact that Callaway is several times larger thanAdams. Similarly, Baxter International and Advanced Medical Optics, both inthe medical/surgical instruments industry, are very similar. Also noteworthyis the significant difference between some firms in the same industry (e.g.,Apple and Dell).

b. Beside industry affiliation, the differences in R&D expenditures as a percent ofsales is due to differences in markets, product mix, and other strategicconsiderations. Apple, for example, has established itself as a technological

innovator and has spent millions of dollars developing unique products suchas the Ipod. Dell, on the other hand, is best known for its operatingefficiencies. Rather than developing new, innovative products, the companysells mainstream computers and peripherals using state-of-the-art inventorymanagement and distribution methods. Because of its strategy, Apple relieson R&D to a much greater extent than does Dell.




16/22

E8-35 (20 minutes)

a. Yes, the equipment is impaired at July 1, 2010. This is because its book value isnot recoverable through future cash flows. Specifically, on July 1, 2010, its bookvalue is $145,000 ($225,000 initial cost less $80,000 accumulated depreciation*)and the estimated future (undiscounted) cash flows are only $125,000.

*4 years of [($225,000-$25,000)/10 years].

b. The impairment loss in a is computed as the equipment's book value minus itscurrent fair value: $145,000 $90,000 = $55,000

Impairment loss (+E, -SE) ............................................. 55,000Equipment* (-A) .................................................... 55,000

* Accumulated depreciation is sometimes credited for the loss.

c. Assuming that the salvage value remains the same after the impairment (this isnot likely given the decline in market value of the asset), the annual depreciationexpense would be ($90,000 - $25,000) / 6 = $10,833 per year.

Depreciation expense (+E, -SE) ....................... 10,833Accumulated depreciation (+XA, -A) .... 10,833

d.

($000) Balance Sheet Income Statement

Transaction

Cash

Asset +

Noncash

Assets -

Contra

Assets =

Liabi-

lities +

Contrib.

Capital +

Earned

Capital Revenues - Expenses =

Net

Incomeb.Impairmentcharge.

-55,000Equipment -

-55,000RetainedEarnings

-+55,000

ImpairmentLoss

= -55,00

c.Depreciationexpense.

-+10,833

AccumulatedDepreciation

-10,833RetainedEarnings

-+10,833

DepreciationExpense

= -10,83




17/22

PROBLEMS

P8-36 (20 minutes)

(i) Land, buildings and equipment (+A) .................................. 246,851Cash (-A) .......................................................................... 246,851

(ii) Depreciation expense (+E, -SE) .......................................... 264,769Accumulated depreciation (+XA, -A) ............................ 264,769

(iii)

Cash (+A) ............................................................................... 5,473

Loss on sale of land, buildings and equipment (+E) ........ 4,021Accumulated depreciation (-XA, +A) .................................. 75,320

Land, buildings and equipment (-A) ............................. 84,814

+ Land, Buildings and Equipment (A) - - Accumulated Depreciation (XA) +

Balance 3,928,936 2,121,158 Balance(i) 246,851 264,769 (ii)

84,814 (iii) (iii) 75,320

Balance 4,090,973 2,310,607 Balance

P8-37 (20 minutes)

a. $704 million / $5,774 million = 12.2%

b. R&D costs are expensed in the income statement except for the portionrelating to depreciable assets that have alternate uses. Expensing (rather thancapitalizing and depreciating) reduces assets, and the additional expensereduces profit and equity (via the reduction in retained earnings). In addition,expensing R&D as incurred means that potentially valuable intangible assetsare omitted from the balance sheet.

c. Agilent has reduced its R&D spending as a percent of revenues in recentyears and, as a result, increased its earnings. This has turned operatinglosses into an operating profit for the company. However, Agilent isdependent upon technology in order to maintain its market position, and R&D

is critical to its very existence. The market is generally not very forgiving oftechnology-related companies that improve operating results via the reductionof R&D spending.




18/22

P8-38 (20 minutes)

($ millions)

a. Depreciation expense (+E, -SE) ............................................. 1,804Accumulated depreciation (+XA, -A) ............................ 1,804

b. Amortization expense (+E, -SE) ($1,826 - $1,804) ................ 22Accumulated amortization (+XA, -A) ............................ 22

c. Property and equipment (+A) ................................................ 3,547Cash (-A) .......................................................................... 3,547

d. Cash (+A) ................................................................................. 49Loss on sale of property and equipment (+E, -SE) ............. 33Accumulated depreciation (-XA, +A) (see T-account) ......... 631

Property and equipment (-A) (see T-account) ............. 713

e. Repair and maintenance expense (+E, -SE) ......................... 609Cash (-A) .......................................................................... 609

+ Property and Equipment (A) - - Accumulated Depreciation (XA) +

Balance 31,982 7,887 Balance(c) 3,547 1,804 (a)

713 (d) (d) 631

Balance 34,816 9,060 Balance

P8-39 (20 minutes)

($ thousands)

a. Depreciation expense (+E, -SE) ............................................ 148,083Accumulated depreciation (+XA, -A) ............................ 148,083

b. Property and equipment (+A) ................................................ 191,789Cash (-A) .......................................................................... 191,789

c. Loss on impairment of property and equipment (+E) ........ 33,995Property and equipment (-A) ......................................... 33,995

d. Cash (+A) ................................................................................. 9,250Loss on sale of property and equipment (+E, -SE) ............. 39,317Accumulated depreciation (-XA, +A) (see T-account) ........ 60,798

Property and equipment (-A) (see T-account) ............. 109,365

+ Property and Equipment (A) - - Accumulated Depreciation (XA) +

Balance 1,843,101 862,026 Balance




19/22

(b) 191,789 148,083 (a)33,995 (c)

109,365 (d) (d) 60,798

Balance 1,891,530 949,311 Balance




20/22

CASES

C8-40 (90 min)

a. PPE Turnover: $9,575/[($2,853 + $2,871)/2] = 3.35Inventory Turnover: $7,165/[($1,099 + $1,024)/2] = 6.75The firm does not appear to be as capital intensive as others in the industrybased on a lower than average PPE turnover ratio than that in the industry.Further, their inventory turnover appears high given the firms business.

b. Accumulated depreciation / Depreciable asset cost$6,040/ ($8,893 - $154*- $231*- $367*) = 0.7419 or 74%

*Note: We eliminate land from the computation because land is never depreciated. Weeliminate construction in progress and capitalized interest because these represent assetsthat the company is building (and the interest paid on the construction loans). Theseassets are not yet in service and are consequently not yet depreciable. This elimination isalso used in part c.

If plant assets are replaced at a constant rate, we would expect thoseassets to be about 50% used up, on average. A substantially higherpercentage used up indicates that the assets are closer to the end oftheir useful lives and will require replacement (and usually highermaintenance costs near the end of their useful lives). Such a situationwould negatively impact future cash flows. Rohm & Haass depreciableassets appear to be substantially used up based on this analysis.

c. Depreciable asset cost / Depreciation expense

($8,893 - $154*- $231* - $367*) / $467 = 17.4 years

d.Depreciation expense (+E, -SE) ........................................... 467

PPE accumulated depreciation (+XA, -A) ...................... 467

PPE (+A) ................................................................................. 520Cash (-A) ............................................................................ 520

Impairment loss (+E, -SE) .................................................... 42PPE (-A) ............................................................................. 42

e. The recognition of the impairment loss reduces operating income and thisin turn reduces cash flow from operations. However, the loss is added backin the operating cash flow adjustments and so there is no impact on thecompanys cash flow.In addition, the impairment charge is not deductible for tax purposes untilthe asset is disposed of, that is, until the loss is realized. Asset impairment




21/22

charges are nonrecurring. Analysts would be justified in treating them astransitory (nonrecurring operating) items for analysis purposes.

C8-41 (40 minutes)

Reducing operating assets is an important means of increasingperformance measures including the return on net operating assets. Mostcompanies focus first on reducing receivables and inventories. This is theso-called low-hanging fruit that can lead to quick results. Some possibleactions include those listed. Students will think of additional possibilities.

a. Reducing receivables through:1. Better underwriting of credit quality2. Better controls to identify delinquencies, automated over-due

notices, and better collection procedures

3. Increased attention to accuracy in invoicing4. Offering early payment incentives

b. Reducing inventories and inventory costs through essentiallyeliminating nonproductive activities including inspection, movingactivities, waiting setup time, :1. Use of less costly components (of equal quality) and production with

lower wage rates2. Elimination of product features not valued by customers3. Outsourcing to reduce product cost

4. Just-in-time deliveries of raw materials5. Elimination of manufacturing bottlenecks to reduce work-in-processinventories

6. Producing to order rather than to estimated demand to reducefinished goods inventories

7. Eliminating defects

c. Reducing PPE assets is much more difficult. The benefits, however, canbe substantial. Some suggestions are the following:1. Sale of unused and unnecessary assets2. Acquisition of production and administrative assets in partnership

with other companies for greater throughput3. Acquisition of finished or semi finished goods (sub-components)

from suppliers to reduce manufacturing assets

d. Reducing unnecessary intangible assets that are reported on thebalance sheet is the most difficult.

1.Sale of assets no longer relevant to company plans




22/22

2.License intangibles to other companiesC8-42 (30 minutes)

a. Take-Two (TT) spent $166,020 in 2007 and in 2008 $145,623 on softwaredevelopment. TTs amortization and write-downs were $106,675 in 2007and $146,102 in 2008. Using EAs method, the money spent on additions

would be expensed, and the amortization and write-downs woulddisappear. The result is that if TTs used EAs approach, the COGS wouldincrease by $59,345 = $166,020 - $106,675 and net income decrease by$38,574 = $59,345(1-0.35) in 2007. But in 2008, TTs COGS woulddecrease by $479 = $146,102 - $145,623 and net income would increaseby $311.35 = $479(1-0.35).

b. A variety of answers are possible here. Amortization (including write-downs) as a percentage of amortizable cost (beginning balance plusadditions) rose from 0.37% in 2007 to 45% in 2006. The increase indicates

a possible increase in the rate of amortization. However, because write-downs are included in the denominator, the increase could be partly dueto an increase in write-downs in 2008. Write downs of $27,136 would leadto 0.37 rate for 2008 (about 18.6% of the total charge of $146,102).

C b id B i P bli h 2011

Documents

Dmp3e Ch08 Solutions 08.12.10 Final