Identify each of the following as (a) a current asset or (b) property, plant, and equipment: 1. Accounts Receivable 2. Building

Identify each of the following as (a) a current asset or (b) property, plant, and equipment:

1. Accounts Receivable
2. Building
3. Cash
4. Land
5. Prepaid Insurance
6. Supplies


Answers:
a. Current asset: 1, 3, 5, 6
b. Property, plant, and equipment: 2, 4

In a recent balance sheet, Microsoft Corporation reported Property, Plant, and Equipment of $27,804 million and Accumulated Depreciation of $14,793 million.

In a recent balance sheet, Microsoft Corporation reported Property, Plant, and Equipment of $27,804 million and Accumulated Depreciation of $14,793 million.

a. What was the book value of the fixed assets?

b.  Would the book value of Microsoft’s fixed assets normally approximate their market values?

Answers:

a. $13,011 million ($27,804 – $14,793)

b. No. Depreciation is an allocation method, not a valuation method. That is, depreciation allocates the cost of a fixed asset over its useful life. Depreciation does not attempt to measure market values, which may vary significantly from year to year.