Property, Plant, and Equipment An increasing number of companies report property, plant, and equipment net of (after deducting) accumulated depreciation in the balance sheet. Under generally accepted accounting principles, companies must report both historical cost and the amount of accumulated depreciation.

a. When only the net balance is reported, are total balance sheet assets and liabilities understated, overstated, or correctly stated? Explain.

b. Where can the historical cost and accumulated depreciation amounts be found when fixed assets are reported net?

c. Two companies, New Corporation (organized in 1998)

and Old Corporation (organized in 1979), both use large amounts of equipment with very long lives (25 years or more). Both report identical amounts of net property, plant, and equipment. Which company most likely paid the larger amount for its fixed assets? Which company’s fixed assets are most likely to be reported closest to their fair values in balance sheets prepared at December 31, 2000? For both answers, explain why.