Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
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Chapter 9, Problem 2SDC
(1)
To determine
State the
(2)
To determine
Calculate the fixed asset turnover of Incorporation L and Incorporation HD for the year ended February 3, 2017, and analyze the performance of both the companies.
(3)
To determine
State the effect of the fixed asset turnover ratios of the two companies.
(4)
To determine
State the amount of depreciation expense that would be reported by Incorporation L for the year ended February 3, 2017, and compute the percentage of depreciation in net sales, then compare the percentage with Incorporation HD, and comment on the performance of both companies.
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Answer the following questions:
Required:
a-1. Find the discussion of Property, Plant, and Equipment and depreciation methods used by Campbell's. Use data from the Campbell
Soup Company annual report
O Straight-line method
O Double declining method
O Written down value method
a-2. Why the particular method is used for the purpose described.
Straight-line depreciation is used for financial reporting purposes because depreciation expense will be lower than under any
of the accelerated depreciation methods.
O Straight-line depreciation is used for financial reporting purposes because depreciation expense will be higher than under any
of the accelerated depreciation methods.
a-3. What method do you think the company uses for income tax purposes?
O Accelerated depreciation using the MACRS rates is probably used for tax purposes to minimize taxes payable.
O Straight line Method using the MACRS rates is probably used for tax purposes to minimize taxes payable.
Written down value Method using…
The fact that generally accepted accounting principles allow companies flexibility in choosing between certain allocation methods can
make it difficult for a financial analyst to compare periodic performance from firm to firm.
Suppose you were a financial analyst trying to compare the performance of two companies. Company A uses the double-declining-
balance depreciation method. Company B uses the straight-line method. You have the following information taken from the 12/31/2021
year-end financial statements for Company B:
Income Statement
Depreciation expense
$10,000
Balance Sheet
Assets:
Plant and equipment, at cost
Less: Accumulated depreciation
Net
$ 200,000
(40,000)
$ 160,000
You also determine that all of the assets constituting the plant and equipment of Company B were acquired at the same time, and that
all of the $200,000 represents depreciable assets. Also, all of the depreciable assets have the same useful life and residual values are
zero.
Required:
1. In order to compare…
Analyzing Clorox's Property, Plant, and Equipment Disclosures 1. Which depreciation method does Clorox use? Why do you think Clorox selected this method? 2. What are the useful lives of the various classes of Clorox's property, plant, and equipment? 3. a. Does Clorox report all of its depreciation expense in a single line item on its income statement? b. What amount did Clorox report as depreciation and amortization for 2021, 2020, and 2019? Do these amounts result in an increase to cash? 4. a. What amount does Clorox report for impairment and disposition losses of property, plant, and equipment for 2021, 2020, and 2019? Where are impairment losses reported? b. What is the conceptual justification for combining impairment and disposition losses? c. With regard to impairments, how does Clorox measure fair value, and how would this measurement be classified in the fair value hierarchy (Level 1, 2, or 3)?
Chapter 9 Solutions
Fundamentals Of Financial Accounting
Ch. 9 - Define long-lived assets. What are the two common...Ch. 9 - Under the cost principle, what amounts should be...Ch. 9 - What is the term for recording costs as assets...Ch. 9 - 4. Waste Management, Inc., regularly incurs costs...Ch. 9 - Distinguish between ordinary repairs and...Ch. 9 - Describe the relationship between the expense...Ch. 9 - Why are different depreciation methods allowed?Ch. 9 - In computing depreciation, three values must be...Ch. 9 - Prob. 9QCh. 9 - After merging with Northwest Airlines, Delta...
Ch. 9 - A local politician claimed, to reduce the...Ch. 9 - What is an asset impairment? How is it accounted...Ch. 9 - What is book value? When equipment is sold for...Ch. 9 - Prob. 14QCh. 9 - Prob. 15QCh. 9 - FedEx Corporation reports the cost of its aircraft...Ch. 9 - Prob. 17QCh. 9 - Prob. 18QCh. 9 - (Supplement 9A) How does depletion affect the...Ch. 9 - (Supplement 9B) Over what period should an...Ch. 9 - Prob. 1MCCh. 9 - Prob. 2MCCh. 9 - Prob. 3MCCh. 9 - A company wishes to report the highest earnings...Ch. 9 - Barber, Inc., depreciates its building on a...Ch. 9 - Thornton Industries purchased a machine on July 1...Ch. 9 - ACME. Inc., uses straight-line depreciation for...Ch. 9 - What assets should be amortized using the...Ch. 9 - Prob. 9MCCh. 9 - The Simon Company and the Allen Company each...Ch. 9 - Classifying Long-Lived Assets and Related Cost...Ch. 9 - Prob. 2MECh. 9 - Prob. 3MECh. 9 - Computing Book Value (Straight-Line Depreciation)...Ch. 9 - Computing Book Value (Units-of-Production...Ch. 9 - Computing Book Value (Double-Declining-Balance...Ch. 9 - Calculating Partial-Year Depreciation Calculate...Ch. 9 - Recording Asset Impairment Losses After recording...Ch. 9 - Recording the Disposal of a Long-Lived Asset...Ch. 9 - Reporting and Recording the Disposal of a...Ch. 9 - Prob. 11MECh. 9 - Prob. 12MECh. 9 - Computing and Evaluating the Fixed Asset Turnover...Ch. 9 - (Supplement 9A) Recording Depletion for a Natural...Ch. 9 - Prob. 15MECh. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - Determining Financial Statement Effects of an...Ch. 9 - Prob. 4ECh. 9 - Determining Financial Statement Effects of...Ch. 9 - Computing Depreciation under Alternative Methods...Ch. 9 - Computing Depreciation under Alternative Methods...Ch. 9 - Prob. 8ECh. 9 - Demonstrating the Effect of Book Value on...Ch. 9 - Evaluating the Impact of Estimated Useful Lives of...Ch. 9 - Calculating the Impact of Estimated Useful Lives...Ch. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Computing and Interpreting the Fixed Asset...Ch. 9 - Computing Depreciation and Book Value for Two...Ch. 9 - Prob. 16ECh. 9 - Prob. 17ECh. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Prob. 2CPCh. 9 - Analyzing and Recording Long-Lived Asset...Ch. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Recording and Interpreting the Disposal of...Ch. 9 - Prob. 3PACh. 9 - Prob. 4PACh. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Recording and Interpreting the Disposal of...Ch. 9 - Analyzing and Recording Long-Lived Asset...Ch. 9 - Prob. 4PBCh. 9 - Accounting for Operating Activities (Including...Ch. 9 - Prob. 1SDCCh. 9 - Prob. 2SDCCh. 9 - Ethical Decision Making: A Mini-Case Assume you...Ch. 9 - Critical Thinking: Analyzing the Effects of...Ch. 9 - Prob. 7SDCCh. 9 - Accounting for the Use and Disposal of Long-Lived...
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