Estimating Useful Life, Percent Used Up, and Gain or Loss on Disposal Husky Energy is one of Canada's largest integrated energy companies. Based in Calgary, Alberta, Husky is publicly traded on the Toronto Stock Exchange. The Company operates in Western and Atlantic Canada, the United States and the Asia Pacific Region with upstream and downstream business segments. The company uses IFRS to prepare its financial statements. During 2018, the company reported depreciation expense of $2,591 million. The property and equipment footnote follows. Transfers from exploration and evaluation Intersegment transfers Changes in asset retirement obligations Disposals and derecognition Exchange adjustments Oil and Gas Processing. Transportation Property, Plant and Equipment (in C$ millions) Properties and Storage Upgrading Refining Other Total Cost Dec. 31, 2017 Additions Acquisitions $38,470 2.465 $79 12 $2.391 62 $8,456 $2,696 $52,092 744 151 3.434 64 3 67 79 - - - 79 (2) (5) (5) 5 7 45 (10) 773 (1) (643) 3 1,139 Retail and 43 2 (632) - 362 1 = Dec. 31, 2018 $40,851 $94 $2,451 $9.956 $2,861 $56,213 Accumulated depletion, depreciation, amortization, and impairment Dec. 31, 2017 $(26,016) 5(47) Depletion, depreciation, amortization, and impairment (1,811) (2) $(1,462) $(3,176) $(1,842) $(32,543) (123) (503) (152) (2.591) Disposals and derecognition 586 Exchange adjustments (138) Dec. 31, 2018 Net book value $(27,379) (1) $(50) = $(1,585) 10 - (264) $(3,933) $(1.995) $(34,942) 596 (1) (404) Dec. 31, 2017 Dec. 31, 2018 Required $12.454 13.472 $32 44 $929 866 6.023 $5,280 $854 $19,549 866 21,271 a. Compute the average useful life of Husky Energy's depreciable assets in 2018. Assume that land is 10% of "Refining." Note: Round your answer to one decimal place (for example, enter 6.8 for 6.77555). 20.1 x years b. Estimate the percent used up of Husky Energy's depreciable assets in 2018. Note: Round percentage to one decimal place (for example, enter 6.7% for 6.655596). 8.8 * 96 c. Consider the disposals and derecognition during the year. This refers to assets that were sold and removed from the balance sheet during 2018. Calculate the net book value of the total PPE disposed during the year. Assume that Husky Energy received $4 million cash proceeds for the year. Determine the gain or loss on the disposal. Note: Do not use any negative signs with your answers. $ 639 x No gain or loss x

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Estimating Useful Life, Percent Used Up, and Gain or Loss on Disposal
Husky Energy is one of Canada's largest integrated energy companies. Based in Calgary, Alberta, Husky is publicly traded on the Toronto Stock Exchange. The Company operates in Western and Atlantic Canada, the United States and the Asia Pacific Region with upstream and downstream business segments. The company uses IFRS to prepare its financial statements. During
2018, the company reported depreciation expense of $2,591 million. The property and equipment footnote follows.
Transfers from exploration and evaluation
Intersegment transfers
Changes in asset retirement obligations
Disposals and derecognition
Exchange adjustments
Oil and
Gas
Processing.
Transportation
Property, Plant and Equipment (in C$ millions)
Properties and Storage Upgrading Refining Other Total
Cost
Dec. 31, 2017
Additions
Acquisitions
$38,470
2.465
$79
12
$2.391
62
$8,456 $2,696 $52,092
744 151 3.434
64
3
67
79
-
-
-
79
(2)
(5)
(5)
5
7
45
(10)
773
(1)
(643)
3
1,139
Retail
and
43
2
(632)
-
362
1
=
Dec. 31, 2018
$40,851
$94
$2,451 $9.956 $2,861 $56,213
Accumulated depletion, depreciation, amortization, and impairment
Dec. 31, 2017
$(26,016)
5(47)
Depletion, depreciation, amortization, and impairment
(1,811)
(2)
$(1,462) $(3,176) $(1,842) $(32,543)
(123) (503) (152) (2.591)
Disposals and derecognition
586
Exchange adjustments
(138)
Dec. 31, 2018
Net book value
$(27,379)
(1)
$(50)
=
$(1,585)
10 -
(264)
$(3,933) $(1.995) $(34,942)
596
(1) (404)
Dec. 31, 2017
Dec. 31, 2018
Required
$12.454
13.472
$32
44
$929
866 6.023
$5,280 $854 $19,549
866 21,271
a. Compute the average useful life of Husky Energy's depreciable assets in 2018. Assume that land is 10% of "Refining."
Note: Round your answer to one decimal place (for example, enter 6.8 for 6.77555).
20.1
x years
b. Estimate the percent used up of Husky Energy's depreciable assets in 2018.
Note: Round percentage to one decimal place (for example, enter 6.7% for 6.655596).
8.8
* 96
c. Consider the disposals and derecognition during the year. This refers to assets that were sold and removed from the balance sheet during 2018. Calculate the net book value of the total PPE disposed during the year. Assume that Husky Energy received $4 million cash proceeds for the year. Determine the gain or loss on the disposal.
Note: Do not use any negative signs with your answers.
$ 639
x
No gain or loss x
Transcribed Image Text:Estimating Useful Life, Percent Used Up, and Gain or Loss on Disposal Husky Energy is one of Canada's largest integrated energy companies. Based in Calgary, Alberta, Husky is publicly traded on the Toronto Stock Exchange. The Company operates in Western and Atlantic Canada, the United States and the Asia Pacific Region with upstream and downstream business segments. The company uses IFRS to prepare its financial statements. During 2018, the company reported depreciation expense of $2,591 million. The property and equipment footnote follows. Transfers from exploration and evaluation Intersegment transfers Changes in asset retirement obligations Disposals and derecognition Exchange adjustments Oil and Gas Processing. Transportation Property, Plant and Equipment (in C$ millions) Properties and Storage Upgrading Refining Other Total Cost Dec. 31, 2017 Additions Acquisitions $38,470 2.465 $79 12 $2.391 62 $8,456 $2,696 $52,092 744 151 3.434 64 3 67 79 - - - 79 (2) (5) (5) 5 7 45 (10) 773 (1) (643) 3 1,139 Retail and 43 2 (632) - 362 1 = Dec. 31, 2018 $40,851 $94 $2,451 $9.956 $2,861 $56,213 Accumulated depletion, depreciation, amortization, and impairment Dec. 31, 2017 $(26,016) 5(47) Depletion, depreciation, amortization, and impairment (1,811) (2) $(1,462) $(3,176) $(1,842) $(32,543) (123) (503) (152) (2.591) Disposals and derecognition 586 Exchange adjustments (138) Dec. 31, 2018 Net book value $(27,379) (1) $(50) = $(1,585) 10 - (264) $(3,933) $(1.995) $(34,942) 596 (1) (404) Dec. 31, 2017 Dec. 31, 2018 Required $12.454 13.472 $32 44 $929 866 6.023 $5,280 $854 $19,549 866 21,271 a. Compute the average useful life of Husky Energy's depreciable assets in 2018. Assume that land is 10% of "Refining." Note: Round your answer to one decimal place (for example, enter 6.8 for 6.77555). 20.1 x years b. Estimate the percent used up of Husky Energy's depreciable assets in 2018. Note: Round percentage to one decimal place (for example, enter 6.7% for 6.655596). 8.8 * 96 c. Consider the disposals and derecognition during the year. This refers to assets that were sold and removed from the balance sheet during 2018. Calculate the net book value of the total PPE disposed during the year. Assume that Husky Energy received $4 million cash proceeds for the year. Determine the gain or loss on the disposal. Note: Do not use any negative signs with your answers. $ 639 x No gain or loss x
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