Chapter 9 Fixed Assets and Intangible Assets
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a. Compute the book value of the fixed assets for the current year and the preceding year and explain the differences, if any.
b. Would you normally expect Apple’s book value of fixed assets to increase or
decrease during the year? EX 9-22
Balance sheet presentation
OBJ. 6
List the errors you find in the following partial balance sheet:
Burnt Red Company Balance Sheet
December 31, 2014 Assets
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,000
Replacement Cost
Accumulated Depreciation
Book Value
Property, plant, and equipment: Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
250,000 50,000
200,000 Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
450,000 160,000
290,000 Factory equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
375,000 140,000
235,000 Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
125,000 60,000
65,000 Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,000 —
90,000 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60,000 10,000
50,000 Total property, plant, and equipment . . . . . . . .
1,350,000 420,000
930,000
EX 9-23 Fixed asset turnover ratio
OBJ. 7
Verizon Communications
is a major telecommunications company in the United States. Two recent balance sheets for Verizon disclosed the following information regarding fixed assets:
Year 2 in millions
Year 1 in millions
Plant, property, and equipment 211,655
229,743 Less accumulated depreciation
123,944 137,758
87,711 91,985
Verizon’s revenue for Year 2 was 106,565 million. Assume the fixed asset turnover for the telecommunications industry averages approximately 1.10.
a. Determine Verizon’s fixed asset turnover ratio for Year 2. Round to two decimal places. b.
Interpret Verizon’s fixed asset turnover ratio. EX 9-24
Fixed asset turnover ratio
OBJ. 7
The following table shows the revenue and average net fixed assets in millions for a recent fiscal year for
Best Buy
and
RadioShack
:
Revenue Average net
Fixed Assets Best Buy
50,272 3,947
RadioShack 4,473
278
a. Compute the fixed asset turnover for each company. Round to two decimal places. b. Which company uses its fixed assets more efficiently? Explain.
Appendix EX 9-25
Asset traded for similar asset
A printing press priced at a fair market value of 275,000 is acquired in a transaction that has commercial substance by trading in a similar press and paying cash for the difference
between the trade-in allowance and the price of the new press. a. 185,000
Continued
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Chapter 9 Fixed Assets and Intangible Assets
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