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.