Financial statement effects of depreciation methods Answer the following questions using data from the Intel Corporation annual report in the appendix:
Required:
a. Find the discussion of depreciation methods used by Intel on page 695. 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 2008 reported on page 689 in the Consolidated Statements of Cash Flows to the cost (not net book value) of property, plant, and equipment reported in the schedule shown on page 695.
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 calculation?
d. Assume that the use of an accelerated depreciation method would have resulted in 25% more accumulated depreciation than reported at December 27, 2008, 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 27, 2008?
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