In a recent balance sheet, Microsoft Corporation reported Property, Plant, and Equipment of $16,259

In a recent balance sheet, Microsoft Corporation reported Property, Plant, and Equipment of $16,259 million and Accumulated Depreciation of $8,629 million.

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

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

Answer:
a.  $7,630 million ($16,259 – $8,629)


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.