Analyzing depreciation on PP&E
The following note is taken from the 2004 Annual Report of ExxonMobil Corporation:
|
Dec. 31, 2004 |
Dec. 31, 2003 |
|||
|
Historical |
Accumulated |
Historical |
Accumulated |
|
|
millions of dollars) |
||||
|
Upstream |
$148,024 |
$62,013 |
$138,701 |
$58,727 |
|
Downstream |
62,014 |
29,810 |
59,939 |
29,566 |
|
Chemical |
21,777 |
10,049 |
20,623 |
10,115 |
|
Dther |
10,607 |
6,767 |
10,052 |
6,557 |
|
Total |
$242,422 |
$108,639 |
$229,315 |
$104,965 |
In the upstream segment, depreciation is on a unit-of-production basis, so depreciable life will vary by field. In the downstream segment, investments in refinery and. . . manufacturing facilities are generally depreciated on a straight-line basis over a 25-year life and service station buildings and fixed improvements over a 20-year life. In the chemical segment, investments in process equipment are depreciated on a straight-line basis over a 20-year life. Accumulated depreciation and depletion totaled $133 783 million at the end of 2004 and $124 350 million at the end of 2003.
Required
Based on the above note, answer the following:
(a) By 2004, what percentage of the upstream segment costs have been depreciated? Assume no salvage value and assume that in 2005, no upstream acquisitions or divestitures take place. If the upstream PP&E are used to produce 10% of their capabilities, what would be the depreciation expense and net book value at the end of 2005?
(b) By 31 December 2003, assuming a 20% salvage (residual) value, on average, what is the age of the chemical PP&E?
(c) Assuming no divestiture or retirement of assets, what was the depreciation expense for all PP&E in 2004?