33:010:272 Chapter Notes - Chapter 9: Asset Turnover, Macrs, Patent Office
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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
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.
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.
1) Revson Corporation purchased land adjacent to its plant toimprove access for trucks making deliveries. Expenditures incurredin purchasing the land were as follows: purchase price, $55,000;brokerĆ¢ĀĀs fees, $6,000; title search and other fees, $5,000;demolition of an old building on the property, $5,700; grading,$1,200; digging foundation for the road, $3,000; laying and pavingdriveway, $25,000; lighting $7,500; signs, $1,500. List the itemsand amounts that should be included in the Land account.
2) Mike Geary, the controller of Shellhammer Company, hasreviewed the expected useful lives and salvage values of selecteddepreciable assets at the beginning of 2017. Here are hisfindings:
Type of Asset | Date Acquired | Cost | Accumulated Depreciation, Jan. 1, 2017 | Useful Life (in Years) | Salvage Value | |||
Old | Proposed | Old | Proposed | |||||
Building | Jan. 1, 2009 | $2,700,000 | $516,000 | 40 | 50 | $120,000 | $84,000 | |
Warehouse | Jan. 1, 2012 | 240,000 | 46,000 | 25 | 20 | 10,000 | 8,000 | |
All assets are depreciated by the straight-line method.Shellhammer Company uses a calendar year in preparing annualfinancial statements. After discussion, management has agreed toaccept Mike's proposed changes. (The "Proposed" useful life istotal life, not remaining life.)
Instructions
(a) Compute the revised annualdepreciation on each asset in 2017. (Show computations.)
(b) Prepare the entry (or entries) torecord depreciation on the building in 2017.