ACCT 2001 Chapter : Chapter 9
Document Summary
Get access
Related Documents
Related Questions
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.
Please provide the correct answers. there are several answersand i need the corrects ones.
1.Compute the cost of the property, plant and equipment at theend of the current year.Explain your answer.
2.What was the approximate age of the property, plant andequipment at the end of the current year?
3. Compute the fixed asset turnover ratio for the currentyear.Explain your results.
4. What is the “excess cost over fair value of assetsacquired”?
5. On the consolidated statement of cash flows, why are thedepreciation and amortization amounts added to income fromcontinuing operations?
Christy Company operates in the entertainment industry. In June2013, Christy purchased Matt’s Movies which produces anddistributes various video products. The purchase resulted in $2.7million in goodwill. Since then, Christy has undertaken a number ofbusiness acquisitions and diversifications as the company expands.Selected date from a recent annual report are as follows: ((dollarsin thousands)
Property, Plant & Equipment and Intangibles BalanceSheet | Current Year | Prior Year |
Film cost (net of amortization) | $1,272 | $ 991 |
Artists’ Contracts and other Entertainment Assets | 761 | 645 |
Property, Plant & Equipment (net) | 2,733 | 2,559 |
Excess of Cost over Fair Value of Assets Acquired | 3,076 | 3,355 |
Accumulated Depreciation on Property, Plant & Equipment | 1,178 | 1,023 |
Income Statement | ||
Total Revenue | 9,714 | 10,644 |
Statement of Cash Flows | ||
Income from Operations | 880 | 445 |
Adjustments | ||
Depreciation | 289 | 265 |
Amortization | 208 | 190 |
Other Adjustments | -1,618 | -256 |
Net Cash provided by Operations | -241 | 644 |
Required
Compute the cost of the property, plant and equipment at the endof the current year.Explain your answer.
What was the approximate age of the property, plant andequipment at the end of the current year?
Compute the fixed asset turnover ratio for the currentyear.Explain your results.
What is the “excess cost over fair value of assetsacquired”?
On the consolidated statement of cash flows, why are thedepreciation and amortization amounts added to income fromcontinuing operations?
Question 1Acompany purchased for cash a machine with a list price of $90,000.The machine was shipped FOB shipping point at a cost of $5,000.Installation and test runs of the machine cost $3,000. Therecorded acquisition costof the machine is whichamount?
| 1 | $98,000 |
| 2 | $128,000 |
| 3 | $90,000 |
| 4 | $93,000 |
Question 2Small, ordinary repairs made to keepa truck running over its useful life have been debited to theVehicles account. As a result of this, which of the followingoccurred?
| 1 | The balance in the Vehicles account was correctly stated. |
| 2 | The balance in the Vehicles account was overstated. |
| 3 | The expenses for the period were overstated. |
| 4 | The net income for the period was understated. |
Question 3 Whatis the annual straight-linedepreciation for an asset thatcost $34,600, has an estimated service life of 8 years, and anestimated salvage valueof $1,400?
| 1 | $4,150 |
| 2 | $1,450 |
| 3 | $4,325 |
| 4 | $4,500 |
Question 4An asset cost $50,000, has anestimated salvage valueof $1,500, and an estimated usefullife of 8 years. What is thedouble-declining-balance depreciationrate?
| 1 | 20.0% |
| 2 | 25.0% |
| 3 | 16.0% |
| 4 | 32.5% |
Question 5An asset having a four-year servicelife and a salvage valueof $5,000 was acquired for $45,000cash on June 20. Ignore the half-year convention and calculate the depreciation expense at the end of the first year, December 31?
| 1 | $10,000, under the straight-line method |
| 2 | $22,500, under the double-declining-balance method |
| 3 | $7,000, under the straight-line method |
| 4 | $11,250, under the double-declining-balance method |
Question 6 Publicly traded companies can use adepreciation method that does not conform to generallyaccepted accounting principles but is based on a declining-balancemethod. What is the name of this accelerated depreciation method?
| 1 | Asset Cost Recovery Statement |
| 2 | Asset Cost Recognition System |
| 3 | Modified Accelerated Cost Recovery System |
| 4 | Accelerated Cost Recovery System |
Question 7 OnJune 28, 2011, a business sold for$1,500 a plant assetthat cost $5,000.The asset had a 5-year useful life, nosalvage value, and had been used by the business sinceJanuary 1, 2008. Straight-linedepreciation was used. Thefiscal year ends on December 31. What was the result of selling theplant asset?
| 1 | No gain or loss on the disposal of plant assets |
| 2 | A $1,000 gain on the disposal of plant assets |
| 3 | A $500 loss on the disposal of plant assets |
| 4 | A $500 unrecognized gain on the sale of a plant asset. |
Question 8Your company currently is generatingnormal earnings that are equal to a 12% return on net identifiable assets of $450,000. A comparable company is generatingnormal earnings that are equal to 10% return on net identifiableassets of $450,000. What is the estimated goodwill ofyour company, when compared to the other company?
| 1 | $90,000 |
| 2 | $45,000 |
| 3 | $9,000 |
| 4 | $15,000 |
Question 9The Baker Mining Company acquired aniron ore deposit for $2,000,000. The company's geologist estimatedthe deposit to contain 1,500,000 tons of iron ore. At the end ofthe first year, 60,000 tons had been extracted. The end-of-yearjournal entry to record thedepletion of the iron ore wouldinclude which of the following?
| 1 | A credit to Iron Ore Inventory of $45,000 |
| 2 | A credit to Accumulated Depletion of $80,000 |
| 3 | A debit to Iron Ore Inventory of $50,000 |
| 4 | None the above, until all of the ore is extracted |
Question 10 Which of the following are investing activities?
| 1 | Selling a plant asset |
| 2 | Exchanging an old asset and cash for a new plant asset |
| 3 | Depreciating or amortizing an asset |
| 4 | Both (A) and (B) |
