ACIS 2115 Study Guide - Midterm Guide: Accrual, Cash Flow, Income Statement
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Before you begin this assignment, it will be helpful if you review
McDonald'sMcDonald's
Corporation
20152015
annual report
(https://www.sec.gov/Archives/edgar/data/63908/000006390816000103/mcd-12312015x10k.htm ).
McDonald'sMcDonald's
Corporation is the world's leading global food service retailer with more than 36,000 locations worldwide in more than 100 countries. The corporation operates and franchises
McDonald'sMcDonald's
restaurants, which serve menu items such as the Big Mac, Chicken McNuggets, and McFlurry desserts. In addition,
McDonald'sMcDonald's
also serves McCafe beverages and pastries.Read the requirements
LOADING...
.
Requirement 1. Where would
McDonald'sMcDonald's
Corporation report plant assets on its financial statements? How are plant assets reported and what is the value as of December 31,
20152015 ?
(Enter any amounts in millions, to the nearest tenth of a million, X.X, as shown in the financial statements.)
Plant assets are reported at | cost | on the | consolidated balance sheet. |
The gross value of plant assets at December 31, 2015 is $ | 37,692.4 | (in millions). |
Requirement 2. Does
McDonald'sMcDonald's
Corporation depreciate its plant assets? How do you know? What is the depreciation method used and the useful lives?
A.
No,
McDonald'sMcDonald's
Corporation does not depreciate its plant assets. We know this because there is no difference between the cost and net value of the plant assets as shown on the consolidated balance sheet. This is reasonable given that the company's only category of plant assets is land, which is not depreciated. As such, no depreciation method is in use.
B.
Yes,
McDonald'sMcDonald's
Corporation depreciates its plant asset. We know this because information about depreciation can be found in the Notes to the Consolidated Financial Statement and an accumulated depreciation and amortization balance is shown on the consolidated balance sheet. The company use the straight-line method to depreciate assets with the following estimated useful lives: up to 40 years for buildings, the lesser of the useful lives of assets or lease terms for leasehold improvements, and three to 12 years for equipment.
C.
Yes,
McDonald'sMcDonald's
Corporation depreciates its plant asset. We know this because information about depreciation can be found in the Notes to the Consolidated Financial Statement and an accumulated depreciation and amortization balance is shown on the consolidated balance sheet. The company use the double-declining-balance method to depreciate assets with the following estimated useful lives: up to 30 years for buildings, five to 10 years for leasehold improvements, and three to 12 years for furniture and equipment.
D.
Yes,
McDonald'sMcDonald's
Corporation depreciates its plant asset. We know this because information about depreciation can be found in the Notes to the Consolidated Financial Statement and depreciation expense is reported on the consolidated statement of income. The company use the double-declining-balance method to depreciate assets with the following estimated useful lives: up to 40 years for buildings, the lesser of the useful lives of assets or lease terms for leasehold improvements, and three to 12 years for equipment.
Write an assessment of the company's financial performance,using ratios to support your conclusion. What can you concludeabout the company's liquidity, solvency, and profitability? Be sureto include the ratios calculation to support your conclusion.
Use the financial statements provided below to calculate thefollowing financial ratios:
2012 | 2011 | |
1. Current Ratio | 10.915 | 6.715 |
2. Quick Ratio | 11.307 | 7.524 |
3. Long-Term Debt-to-Equity Ratio | 2.785 | 3.834 |
4. Debt-to-Equity Ratio | 2.785 | 3.834 |
5. Long-Term Debt Ratio | 2.866 | 3.988 |
6. Accounts Receivable Turnover Ratio (Assume that60% of Sales are Credit | 25.491 | 8.908 |
7. Inventory Turnover Ratio (Assume 2011 beginninginventory was -0-.) | -0.715 | -0.450 |
8. Asset Turnover Ratio | 0.163 | 0.076 |
9. Gross Profit Percentage | 0.731 | 0.806 |
10. Net Profit Margin Percentage | 0.375 | 0.311 |
11. Return on Assets | 0.061 | 0.024 |
12. Return on Equity | 0.237 | 0.118 |
Get Your Motor Runnin'
Compartive Balance Sheets
2012 | 2011 | |
Assets | ||
Current Assets | ||
Cash | $198,456 | $147,333 |
Accounts Receivable | 4,000 | 5,000 |
Allowance for Uncollectible Accounts | (250) | 80 |
Supplies | 200 | 250 |
Inventory | 35,000 | 32,000 |
Total current assets | 237,406 | 184,663 |
Property, Plant, and Equipment | ||
Equipment | 60,000 | 15,000 |
Accumulated Depreciation - Equipment | (14,000) | (1,000) |
Vehicles | 35,000 | 35,000 |
Accumulated Depreciation - Vehicles | (4,800) | (2,400) |
Building | 684,375 | 684,375 |
Accumulated Depreciation - Building | (25,000) | (12,500) |
Land | 46,875 | 46,875 |
Land Improvements | 23,750 | 23,750 |
Accumulated Depreciation - Land Improvements | (2,539) | (663) |
Total PP&E | 803,661 | 788,437 |
Total Assets | $1,041,067 | $973,100 |
Liabilities and Stockholders' Equity | ||
Current Liabilities | ||
Accounts Payable | $20,000 | $24,000 |
Wages Payable | 1,000 | 500 |
Warranties Payable | 750 | 500 |
Notes Payable | 0 | 2,500 |
Total current liabilities | 21,750 | 27,500 |
Long-term Liabilities | ||
Bonds Payable | 750,000 | 450,000 |
Mortgage Payable | 0 | 300,000 |
Total long-term liabilities | 750,00 | 750,000 |
Total liabilities | 771,750 | 777,500 |
Stockholder's Equity | ||
Common Stock | 125,000 | 125,000 |
Paid-in capital in excess of par - common | 25,000 | 25,000 |
Preferred Stock | 40,000 | 20,000 |
Paid-in capital in excess of par - preferred | 25,000 | 15,000 |
Less: Treasury Stock | (3,000) | (3,000) |
Paid-in capital - treasury stock | 500 | 500 |
Retained Earnings | 56,817 | 13,100 |
Total stockholders' equity | 269,317 | 195,600 |
Total liabilities and stockholders' equity | $1,041,067 | $973,100 |
Get Your Motor Runnin'
Comparative Income Statements
2012 | 2011 | |
Service Revenue | $93,693 | $50,230 |
Sales | 76,250 | 24,000 |
Cost of Goods Sold | (45,750) | (14,400) |
Gross Margin | $124,193 | $59,830 |
Operating Expenses: | ||
Advertising Expense | $7,500 | $5,000 |
Bad Debt Expense | 330 | 0 |
Depreciation Expense - Equipment | 13,000 | 5,667 |
Depreciation Expense - Vehicles | 2,400 | 2,400 |
Depreciation Expense - Building | 12,500 | 12,500 |
Depreciation Expense - Land Improvements | 1,876 | 663 |
Wages Expense | 22,870 | 10,500 |
Total Expenses | 60,476 | 36,730 |
Net Income | $63,717 | $23,100 |