P7-67A. (Learning Objectives 2, 3, 6: Depreciation; recording intangibles; analyzing PPE transactions from a company’s financial statements) Gadgets, Inc., sells electronics and appliances. The excerpts that follow are adapted from Gadgets’s financial statements for 20X6 and 20X5.

Requirements 1. How much was Gadgets’s cost of PPE at February 28, 20X6? How much was the book value of PPE? Show computations.
2. The financial statements give three pieces of evidence that Gadgets purchased PPE and goodwill during fiscal year 20X6. What are they?
3. Prepare T-accounts for Property, Plant, and Equipment; Accumulated Depreciation; and Goodwill. Then show all the activity in these accounts during 20X6. Label each increase or decrease and give its dollar amount. During 20X6, Gadgets sold PPE that had cost the company $70 million (accumulated depreciation on these assets was $56 million). Assume there were no losses on goodwill during 20X6.

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Balance Sheet (dollars in millions) Assets Total current assets Property, plant, and equipment.. Less: Accumulated depreciation. Goodwill.. February 28 20X6 20X5 $7,980 $6,900 4,835 4,198 2,128 1,724 560 520 Statement of Cash Flows (dollars in millions) 20X6 Year Ended February 28 20X5 Operating activities: Net income $1,146 $ 981 Non-cash items affecting net income: Depreciation 460 457 Investing activities: Additions to property, plant, and equipment (707) (615)