8.15 Analyzing Disclosures Regarding Fixed Assets. Exhibit 8.21 presents selected financial statement data for three chemical companies: Monsanto Company, Olin Corporation, and NewMarket Corporation. (NewMarket was formed from a merger of Ethyl Corporation and Afton Chemical Corporation.)

Exhibit 8.21Three Chemical Companies Selected Financial Statement Data on Depreciable Assets (amounts in millions) (Problem 8.15)

Sources: NewMarket Corporation, Form 10-K for the Fiscal Year ended December 31, 2004; Monsanto Company, Form 10-K for the Fiscal Year ended August 31, 2004; and Olin Corporation, Form 10-K for the Fiscal Year ended December 31, 2004.

Required

1. Compute the average total depreciable life of assets in use for each firm.

2. Compute the average age to date of depreciable assets in use for each firm at the end of the year.

3. Compute the amount of depreciation expense recognized for tax purposes for each firm for the year using the amount of the deferred taxes liability related to depreciation timing differences.

4. Compute the amount of net income for the year for each firm assuming that depreciation expense for financial reporting equals the amount computed in Requirement c for tax reporting.

5. Compute the amount each company would report for property, plant, and equipment (net) at the end of the year if it had used accelerated (tax reporting) depreciation instead of straight-line depreciation.

New Market Corporation Monsanto Company Olin Corporation $752 777 $4,611 4,604 $1,796 1,826 1,301 2,331 2,517 1,348 Depreciable assets at cost: Beginning of year End of year Accumulated depreciation: Beginning of year End of year Net income Depreciation expense Deferred tax liability relating to depreciable assets: Beginning of year End of year Income tax rate Depreciation method for financial reporting Depreciation method for tax reporting 267 256 35% Straight-line Accelerated 35% Straight-line Accelerated 35% Straight-line Accelerated New Market Corporation Monsanto Company Olin Corporation $752 777 $4,611 4,604 $1,796 1,826 1,301 2,331 2,517 1,348 Depreciable assets at cost: Beginning of year End of year Accumulated depreciation: Beginning of year End of year Net income Depreciation expense Deferred tax liability relating to depreciable assets: Beginning of year End of year Income tax rate Depreciation method for financial reporting Depreciation method for tax reporting 267 256 35% Straight-line Accelerated 35% Straight-line Accelerated 35% Straight-line Accelerated