(Learning Objective 2, 4, 7: Analyzing plant asset transactions from a company’s financial statements) Hewlett Packard Company (HP) is the leading computer company in the world. The excerpts that follow are adapted from HP’s financial statements for fiscal year 2006.
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Balance Sheet (dollars in millions) |
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October 31, |
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2006 |
2005 |
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Assets |
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Total current assets |
$48,264 |
$43,334 |
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Property, plant, and equipment |
15,024 |
13,880 |
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Less: Accumulated depreciation |
8,561 |
7,429 |
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Goodwill |
16,853 |
16,441 |
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Statement of Cash Flows (dollars in millions) |
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Year Ended October 31, |
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2006 |
2005 |
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Cash Flows from Operating Activities: |
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Net income |
$ 6,198 |
$ 2,398 |
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Noncash items affecting net income: Depreciation |
2,353 |
2,344 |
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Cash Flows from Investing Activities: |
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Capital expenditures |
$(2,536) |
$(1,995) |
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Acquisition of businesses |
(855) |
(641) |
Required
Answer these questions about Hewlett Packard’s plant assets and goodwill:
1. How much was HP’s cost of plant assets at October 31, 2006? How much was the book value of plant assets? Show computations.
2. The financial statements give 4 evidences that HP purchased plant assets and goodwill during 2006. What are they?
3. Prepare T accounts for Property, Plant, and Equipment; Accumulated Depreciation; and Goodwill. Then show all the activity in each account during 2006. Label each increase or decrease and give its dollar amount. During 2006, HP sold plant assets that had cost the company $1,392 million (accumulated depreciation on these assets was $1,221 million). Assume there was no loss on goodwill during 2006.