7. Effects of accelerated depreciation] Exhibit 8P- contains data from the 1999 annual report of Boeing [BA], a leading man- ufacturer of aviation equipment.

a. Despite more than $5 billion of capital expenditures over the four years 1996 1999, Boeing's net plant and equipment rose by barely 4% One explanation is the sale of fixed assets in 1999 (proceeds $359 million) Discuss two other reasons for the slow growth in net plant and equipment

b. Boeing reported gains on the disposition of fixed assets of $100 million over the 1998-99 period. Discuss how that gain was affected by Boeing's depreciation method

c. Assume that in 1999 Boeing adopted the straight-line de- preciation method retroactively, with no change in depre- ciable lives. Describe the expected effect of that change on Boeing's: (i) Net income for 1998 and 1999 (Hint: Consider the trend of capital expenditures for those two years.) (ii) Stockholders' equity at December 31, 1999. (ili) Cash from operations for 1998 and 1999. (iv) Fixed-asset turnover for 1999

d. Assume that Boeing adopted the straight-line depreciation method prospectively as of January 1, 2000. with no change in depreciable lives Describe the expected effect of that change en Boeing's: (i) Net income for 2000 compared with net income assum- ing no accounting change