Financial statement effects of depreciation methods. Answer the following questions
using data from the Intel Corporation Annual Report in the Appendix.
a. Find the discussion of depreciation methods used by Intel on page 26.
Explain why the particular method is used for the purpose described. What
method do you think the company uses for income tax purposes?
b. Calculate the ratio of the depreciation expense for 2001 reported on page 22
in the Consolidated Statements of Cash Flows to the cost (not net book
value) of property, plant, and equipment reported in the December 29, 2001,
c. Based on the ratio calculated in part b and the depreciation method being
used by Intel, what is the average useful life being used for its depreciation
d. Assume that the use of an accelerated depreciation method would have
resulted in 50% more accumulated depreciation than reported at December
29, 2001, and that Intel’s Retained Earnings account would have been
affected by the entire difference. By what percentage would this have
reduced the retained earnings amount reported at December 29, 2001?
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