ADM 1340 Lecture Notes - Lecture 4: Book Value, Financial Statement, Accounts Payable

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ADM 1340 Lecture Notes - Lecture 3: General Ledger, Trial Balance, Retained Earnings

ADM 1340 Lecture Notes - Lecture 4: Book Value, Financial Statement, Accounts Payable

ADM 1340 Lecture Notes - Lecture 5: Financial Statement

Document Summary

Tangible assets with relatively long useful lives: used in operating the business. Furniture: usually listed in order of permanency. Depreciation: allocation of the cost of property, plant, and equipment over their estimated useful lives: Companies systematically assign a portion of the cost of an asset to expense each year. Under ifrs, this allocation is referred to as depreciation for property, plant, and equipment, and amortization for intangible assets. Under aspe, amortization is often used instead of depreciation. The cost of long-lived assets with indefinite lives is not depreciated (e. g. land) Accumulated depreciation account shows the total amount of depreciation taken to date. The difference between the cost of the asset and its accumulated depreciation is referred to as the carrying amount of the asset. Intangible assets: non-current assets that do not have physical substance and represent a privilege or a right held by the company.

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

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?

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.

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.

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.

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.

Balance Sheet Preparation

The following is a December 31, 2015, post-closing trial balancefor the Happy Valley Corporation.

Account Title	Debits	Credits
Cash	25100
Accounts Receivable	53600
Inventories	82000
Interest Payable		8420
Marketable Securities	41600
Land	105000
Buildings	304000
Accumulated Depreciation -- Building		100000
Equipment	76000
Accumulated Depreciation -- Equipment		25600
Copyright (net of Amortization)	9760
Prepaid Expenses	32700
Accounts Payable		60200
Unearned Revenues		17300
Notes Payable		256000
Allowance for Uncollectible Accounts		4950
Common Stock		?
Retained Earnings		69900

Additional Information:

1. The $105000 balance in the landaccount consists of $87600 for the cost of land where the plant andoffice buildings are located. The remaining amount represents thecost of land being held for speculation.

2. The $41600 in the marketablesecurities account represents an investment in the common stock ofanother corporation. Valley intends to sell one-half of the stockwithin the next year.

3. The notes payable account consistsof a note due in six months and a $187000 note due in three equalannual installments, with the first payment due in August of2015.

Required: Calculate the following balance sheet totals for theValley Pump Corporation at December 31, 2014.

Common Stock

Current Assets

Property, Plant and Equipment (net)

Intangible and Other Assets

Total Assets

Short-term Note Payable

Current Liabilities

Long-term Liabilities

Total Equity

Total Liabilities and Equity

Please include a detailed answer for the accounts you includedto find the balance of each.

Your answer is partially correct. Try again.

Presented below is the balance sheet of Sargent Corporation forthe current year, 2014.

SARGENT CORPORATION BALANCE SHEET DECEMBER 31, 2014
Current assets	$ 487,300	Current liabilities	$ 382,300
Investments	642,300	Long-term liabilities	1,002,300
Property, plant, and equipment	1,722,300	Stockholdersâ equity	1,772,300
Intangible assets	305,000		$3,156,900
	$3,156,900

The following information is presented.

1.		The current assets section includes cash $152,300, accountsreceivable $172,300 less $12,300 for allowance for doubtfulaccounts, inventories $182,300, and unearned rent revenue $7,300.Inventory is stated on the lower-of-FIFO-cost-or-market.
2.		The investments section includes the cash surrender value of alife insurance contract $42,300; investments in common stock,short-term (trading) $82,300 and long-term (available-for-sale)$272,300; and bond sinking fund $245,400. The cost and fair valueof investments in common stock are the same.
3.		Property, plant, and equipment includes buildings $1,042,300less accumulated depreciation $362,300; equipment $452,300 lessaccumulated depreciation $182,300; land $502,300; and land held forfuture use $270,000.
4.		Intangible assets include a franchise $167,300; goodwill$102,300; and discount on bonds payable $35,400.
5.		Current liabilities include accounts payable $142,300; notespayable-short-term $82,300 and long-term $122,300; and income taxespayable $35,400.
6.		Long-term liabilities are composed solely of 8% bonds payabledue 2022.
7.		Stockholdersâ equity has preferred stock, no par value,authorized 200,000 shares, issued 72,300 shares for $433,800; andcommon stock, $1.00 par value, authorized 400,000 shares, issued102,300 shares at an average price of $10. In addition, thecorporation has retained earnings of $315,500.

Prepare a balance sheet in good form, adjusting the amounts in eachbalance sheet classification as affected by the information givenabove. (List Current Assets in order of liquidity. ListProperty, Plant and Equipment in order of Land, Building andEquipment. Enter account name only and do not provide thedescriptive information provided in thequestion.)

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ADM 1340 Lecture Notes - Lecture 4: Book Value, Financial Statement, Accounts Payable

ADM 1340 Lecture Notes - Lecture 3: General Ledger, Trial Balance, Retained Earnings

ADM 1340 Lecture Notes - Lecture 4: Book Value, Financial Statement, Accounts Payable

ADM 1340 Lecture Notes - Lecture 5: Financial Statement

Document Summary

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