Please answer 10.6 a-f ! I have attached all the photos

10.6 Interpreting Disclosures for Property, Plant, and Equipment Petrobras, which operates in the energy sector, is Brazil's larg. est company. Its shares trade on several of the world's leading stock exchanges. A portion of Petrobras' balance sheet, its income statement, and extracts from a note on PP&E are presented in Exhibit 10.1. Required Based on the information provided, answer the following ques- tions: a. What portion of Petrobras "Equipment and other assets" had been used up by the end of fiscal 2008? Exhibit 10-1 Petrobras Disclosures Statements of Income December 31, 2008 and 2007 On thousands of reais, except net income per share) Consolidated 2008 Note 2007 Statements of Income Gross operating revenues Selling expenses Products Services, mainly freight 266,217,208 276,872 266,494,080 (51,375,544) 215,118,536 (141,623,359) 73,495,177 Sales charges Net operating revenues Cost of products and services sold Gross profit Operating income (expenses) Selling expenses Financial Expenses 218,050,202 203,972 218,254,174 (47,676,449) 170,577,725 (104,398,043) 66,179,682 0,162,264) 16,059,734) 18 (4,193,135) (3,292,002) (Continued) b. How many years are left in the lives of Petrobras Equipment and other assets," on average? Stale clearly any assumptions that you make in arriving at your estimate. c. Suppose that Petrobras assumes a zero salvage value for their "Equipment and other assets." For cach $100 in new asset investments, what is the annual amount of depreciation expense charged to the income statement? d. Suppose that other leading energy companies charge $12 in depreciation expense for each $100 invested in new equip- ment. Are Petrobras' depreciation policy assumptions materi- ally different from those of their competitors? Support your answer. e. What line item on Petrobras income statement is most affected by their depreciation policy? Explain why. f. Aside from comparing Petrobras depreciation policy assump- tions to those of their competitors, what other red flags" might onc look for in order to assess whether Petrobras is overly con- servative or overly aggressive in taking depreciation expenses? Is there any evidence of these issues on Petrobras' financial statements? 20.1 Taxes and contributions Prepaid expenses Other current assets 9.641,247 1,393,879 1.461,801 63,575,278 7,781,536 1,429,829 1.493.200 53,373,766 9 10 1,326,522 809,673 4,066,280 2.901.902 797,851 3,922,370 Noncurrent assets Long-term receivables Trade accounts receivable, net Petroleum and alcohol account - SIN Marketable securities Project financing Deposits in court Prepaid expenses Advance for pension plan Deferred income and social contribution taxes Inventories Other long-term receivables 11.2 12 1,853,092 1,400,072 21 203 8 1.693.495 1,514,301 1.296,810 8,333,490 236,753 1.325,865 22,022,837 7,822,074 139,940,726 5,532,053 2,536,341 177,854,034 13 14 10.238,308 303,929 1.256,96 21,254,843 5,106,495 190,754,167 8,003,213 3,469,846 228,588,564 Investments Property, plant, and equipment Intangible assets Deferred charges 15 292,163,842 231,227,800 See the accompanying notes to the financial statements. Property. Plant, and Equipment By Type of Asset 2007 Net Estimated Useful Life in Years 25 to 40 3 to 30 Buildings and improvements Equipment and other assets Land Material Advances to suppliers Expansion projects Oil and gas exploration and production development costs (E&P) Consolidated 2008 Accumulated Cost Depreciation Net 9,382,619 3,115,564) 6.267,055 119,999,208 (55,854,051) 64,145,157 1,138,720 1,138,720 6,034,143 6,034, 143 5.189.735 5.189.735 59,238,898 59,238,898 3,800,350 49.414,524 854,848 4.247,098 2.624.093 39,964,366 48,740.459 83,883,258 284,866,581 (35,142,799 194,112,414) 39,035,447 139,940,726 190,754,167 Note Consolidated 2008 2007 3,494,430 2.417.659 3,827,489 3,146,547) 18 18 Statements of Income Revenues Exchange and monetary variations, net Administrative and general expenses Management and board of directors remuneration Administrative Taxes Cost of research and technological development Loss of recovery of assets Exploratory costs for the extraction of crude oil and gas Healthcare and pension plans Other operating income and expenses, net (35,792) 0,211,566) (862,7661 (1.705.572) (933,088) 8.494.258) (1,427,395) (4.712,243) (24.416,160) (29.259) (6,398,633) (1.255,511) (1.712,338) (446,129 (2.569,724) (2.494,510) (5,188,393) (30,175,121) 21 18 13 (874.218) 48. 204,799 (465,274) 35,539,287 20,5 20,5 Equity in income of subsidiaries and associated companies Equity in earnings (losses) of investments Income from operations before income and social contribution taxes, employee and management profit sharing and minority interest Social contribution Income tax Income before employees and directors' profit-sharing and minority interest Employees and directors' profit-sharing Income before minority interest Minority interest Net income for the year Net income per share at the end of the year - R$ Soe the accompanying notes to the financial statements 169,529 (11,792,4491 32.242,821 12,876,775) (8,395.983) 24,266,529 22 0.344.526) 30.898.295 2.089.497 32.987.792 3.76 (1.011.914) 23.254.615 (1.742,826) 21,511,789 4,90 Balance Sheets December 31, 2008 and 2007 (In thousands of reais) Consolidated 2008 Note 2007 5 Assets Current assets Cash and cash equivalents Marketable securities Trade accounts receivable, net Dividends receivable Inventories 10 6 15.888.596 288,751 14.903,732 20,101 19,977,171 13,070,849 589,788 11,328,967 80,596 17,599,001 7.1 8 10.6 Interpreting Disclosures for Property, Plant, and Equipment Petrobras, which operates in the energy sector, is Brazil's larg. est company. Its shares trade on several of the world's leading stock exchanges. A portion of Petrobras" balance sheet, its income statement, and extracts from a note on PP&E are presented in Exhibit 10.1. Required Based on the information provided, answer the following ques- tions: a. What portion of Petrobras" "Equipment and other assets" had been used up by the end of fiscal 2008? Exhibit 10-1 Petrobras Disclosures Statements of Income December 31, 2008 and 2007 On thousands of reais, except net income per share) Consolidated 2008 Note 2007 Statements of Income Gross operating revenues Selling expenses Products Services, mainly freight 266,217,208 276,872 266,494,080 (51,375,544) 215,118,536 (141,623,359) 73,495,177 Sales charges Net operating revenues Cost of products and services sold Gross profit Operating income (expenses) Selling expenses Financial Expenses 218,050,202 203,972 218,254,174 (47,676,449 170,577,725 (104,398,043) 66,179,682 0,162,264) (6,059,734) 18 (4,193,135) (3,292,002) (Continued)