Question
At the beginning of 2011, the Rolls-Royce Group reported in its footnotesthat its plant and equipment had an original cost of 2,538 million andthat accumulated
At the beginning of 2011, the Rolls-Royce Group reported in its footnotesthat its plant and equipment had an original cost of 2,538 million andthat accumulated depreciation was 1,497. Rolls-Royce depreciates itsplant and equipment on a straight-line basis under the assumption thatthe assets have an average useful life of 13 years (assume a 10 percentsalvage value). Rolls-Royce's tax rate equals 26.5%.What adjustments should be made to Rolls-Royce's(i) balance sheet at the beginning of 2011; and(ii) income statement for the year 2011, if you assume that the plantand equipment has an average useful life of ten years (and a 10percent salvage value)?
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