Chapter 11: Q11-28Q (page 583)
Wal-Mart Stores, Inc. in 2014 reported net income of \(16.4 billion, net sales of \)482.2 billion, and average total assets of $204.2 billion. What is Wal-Mart’s asset turnover? What is Wal-Mart’s return on assets?
Answer
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(Depreciation—Change in Estimate) Machinery purchased for \(60,000 by Tom Brady Co. in 2013 was originally estimated to have a life of 8 years with a salvage value of \)4,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2018, it is determined that the total estimated life should be 10 years with a salvage value of $4,500 at the end of that time. Assume straight-line depreciation.
Instructions
Last year, Wyeth Company recorded an impairment on an asset held for use. Recent appraisals indicate that the asset has increased in value. Should Wyeth record this recovery in value?
(Depreciation—Replacement, Change in Estimate) Greg Maddox Company constructed a building at a cost of \(2,200,000 and occupied it beginning in January 1998. It was estimated at that time that its life would be 40 years, with no salvage value.
In January 2018, a new roof was installed at a cost of \)300,000, and it was estimated then that the building would have a useful life of 25 years from that date. The cost of the old roof was $160,000.
Instructions
(Depletion Computations—Minerals) At the beginning of 2017, Aristotle Company acquired a mine for \(970,000. Of this amount, \)100,000 was ascribed to the land value and the remaining portion to the minerals in the mine. Surveys conducted by geologists have indicated that approximately 12,000,000 units of ore appear to be in the mine. Aristotle incurred \(170,000 of development costs associated with this mine prior to any extraction of minerals. It also determined that the fair value of its obligation to prepare the land for an alternative use when all of the mineral has been removed was \)40,000. During 2017, 2,500,000 units of ore were extracted and 2,100,000 of these units were sold.
Instructions
Compute the following.
(Different Methods of Depreciation) Jackel Industries presents you with the following information.
Description | Date Purchased | Cost | Salvage Value | Life in years | Depreciation Method | Accumulated depreciation to 12/31/18 | Depreciation for 2019 |
Machine A | 2/12/17 | \(142,500 | \)16,000 | 10 | (a) | $33,350 | (b) |
Machine B | 8/15/16 | (c) | 21,000 | 5 | SL | 29,000 | (d) |
Machine C | 7/21/15 | 75,400 | 23,500 | 8 | DDB | (e) | (f) |
Machine D | 10/12/(g) | 219,000 | 69,000 | 5 | SYD | 70,000 | (h) |
Instructions
Complete the table for the year ended December 31, 2019. The company depreciates all assets using the half-year convention.
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