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Chapter 10 - Plant Assets, Natural Resources, and Intangibles
Serial Problem — SP 10
Serial Problem — SP 10, Business Solutions (45 minutes)
1. For the three months ended March 31, 2016, depreciation expense was
$400 for office equipment and $1,250 for the computer equipment.
2.
December 31,
2015
December 31,
2016
Office Equipment........................................ $ 8,000 $ 8,000
Accumulated Depreciation–Office
December 31,
2015
December 31,
2016
Computer Equipment................................. $20,000 $20,000
3.
Total asset turnover = Net sales / Average total assets
The 3-month total asset turnover at March 31, 2016:
An estimate of its annual total asset turnover is 1.73 (0.432 x 4
quarters). This value for the total asset turnover is lower than usual for
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Chapter 10 - Plant Assets, Natural Resources, and Intangibles
Reporting in Action — BTN 10-1
1. The percent of original cost remaining to be depreciated is computed
by taking the ratio of the book value of property and equipment to the
original cost ($ millions):
2. In Apple’s “Summary of Significant Accounting Policies" (Note 1:
Property, Plant and Equipment) it discloses estimated useful lives by
major asset category as follows:
Asset Life (in years)
3. The change in total property and equipment before accumulated
depreciation for the year ended September 28, 2013, is an increase of
$6,632 million ($28,519 – $21,887). In comparison, according to the
4. Total asset turnover for year ended ($ millions):
9/28/2013: = 0.89 times
5. Solution depends on the financial statement data obtained.
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$170,910
($207,000 + 176,064)/2
Chapter 10 - Plant Assets, Natural Resources, and Intangibles
Comparative Analysis — BTN 10-2
Note: Total asset turnover = Net sales / Average total assets
1. Total asset turnover for Apple ($ millions)
Current Year: = 0.89 times
2. Each dollar of Apple’s assets produces $0.89 and $1.07 in net sales for
the current and prior year, respectively. Each dollar of Google’s assets
produces $0.58 and $0.60 in net sales for the current year and prior
10-583
$170,910
($207,000 + 176,064)/2
Chapter 10 - Plant Assets, Natural Resources, and Intangibles
Ethics Challenge — BTN 10-3
1. When managers acquire new assets a number of decisions relative to
2. When assets are placed in use on a day other than the first day of the
month an assumption is often made that the assets are placed in use on
the first day of the month nearest to the date of the purchase. For
example, for assets purchased on the 1st through 15th days of the month,
3. By always assuming the first day of the following month as the date of
purchase, less depreciation is (initially) accrued for the assets
employed. This means depreciation expense will be less than if assets
Communicating in Practice — BTN 10-4
The solution to this activity will vary based on the industry and the
companies chosen for analysis. Many instructors find it useful to report
the results from the teams to the class for purposes of classroom
discussion and analysis.
10-584
Chapter 10 - Plant Assets, Natural Resources, and Intangibles
Taking It to the Net — BTN 10-5
1. Yahoo! has Goodwill in the amount of ($ thousands) $4,679,648 at
December 31, 2013.
2.
Goodwill (in $ thousands)
Total
Amount
$ Change
from Prior
Year
%
Change
Balance, December 31, 2012.....................$3,826,749
Goodwill has increased over this period. The increase is due mainly to
3. Yahoo!’s intangible assets are categorized into the three categories
below at December 31, 2013. These intangibles represent 2.5%
($417,808 / $16,804,959) of total assets.
December 31, 2013 (in thousands)
Customer, affiliate and advertiser related relationships.................$ 205,818
Developed technology and patents...................................................140,499
4. Note 6 indicates that Trade names, trademarks, and domain names
have original estimated useful lives of “one year to an indefinite life.” If
the trademarks and trade names have been registered with the
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Chapter 10 - Plant Assets, Natural Resources, and Intangibles
Teamwork in Action — BTN 10-6
1. Annual depreciation for each year of the asset’s useful life:
Year Straight-line Double-Declining-Balance Units-of-Production
2013 ($44,000-$2,000)/4
= $10,500
(100%/4) x 2 = 50% is
declining-balance rate.
BV x rate = $44,000 x 50%
= $22,000
($44,000-$2,000)/60,000 miles
= $.70 per mile.
12,000 miles x $.70 = $ 8,400
2. Depreciation is recorded in an adjusting entry at the end of each
period. The entry is:
3. Each expert’s presentation of the comparison of methods will be
slightly different. The experts should make the following points: The
straight-line method reduces net income by the same amount each
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Chapter 10 - Plant Assets, Natural Resources, and Intangibles
Teamwork in Action — BTN 10-6 - continued
4. Book value at the end of each year
= Cost - Accumulated depreciation
= $44,000 – (amount varies by method—see part 1 for annual amounts)
Year Straight-line
Double-Declining-
Balance Units of Production
2013......... $33,500 $22,000 $35,600
For reporting purposes, each expert will have different results. But
each should show:
Plant Assets:
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Chapter 10 - Plant Assets, Natural Resources, and Intangibles
Entrepreneurial Decision — BTN 10-7
Part 1
(a) Under current conditions, the total asset turnover is 3.2. This is
computed as net sales of $8,000,000 divided by its average total assets
(b) Under this proposal, its asset turnover would increase to 4. This is
computed by taking its net sales of $12,000,000 ($8,000,000 +
$4,000,000) and dividing by its average total assets of $3,000,000. This
Part 2
The proposal would yield an improved total asset turnover of 4 vis-à-vis the
current total asset turnover of 3.2. However, we need to recognize that this
proposal depends on our confidence in both maintaining current sales,
*We must remember that total asset turnover is only one dimension of a complete analysis of this
proposal. For example, we would want to explore the impact of this proposal on net income and
other activities.
10-588
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Chapter 10 - Plant Assets, Natural Resources, and Intangibles
Hitting the Road — BTN 10-8
No formal solution exists for this activity. It is usually interesting for the
class to exchange their discoveries via class discussion. This is
Global Decision — BTN 10-9
Note: Total asset turnover = Net sales / Average total assets
1. Total asset turnover for Samsung (KRW in millions):
2. Samsung was more efficient in using its assets to generate net sales
than Google and Apple. Specifically, in the current year, each KRW
worth of assets generated 1.16 times that in net sales, compared to 0.89
10-589
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
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