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In: Accounting

Using fixed asset disclosure to compare companies'/Fixed asset turnover and average age of depreciable assets The...

Using fixed asset disclosure to compare companies'/Fixed asset turnover and average age of depreciable assets

The following PP & E information for fiscal year 2017 is available:

Harley Davidson

Amazon

( in millions)

Walgreens

Net sales

$4,915

$107,006

$117,351

Historical cost

$3,285.3

$68,573

$22,935

Accumulated depreciation

2,317.5

19,707

8,600

Net PP & E

$ 967.8

$48,866

$14,335

Annual depreciation

222

11,478

1,718

Capital expenditures

206

11,995

1,325

Depreciation method

SL

SL

SL

Useful life- Buildings

30

20-40

20-50

Useful life- Furniture & Fixtures

5

3-10

3-20

Useful tife- IT Equipment

3-7

3-5

3-5

Required:

  1. Estimate the total useful life, age and remaining useful life for each company.
  2. Interpret the estimates. What items might effect comparisons across these companies
  3. Calculate and compare fixed asset turnover for each company

Solutions

Expert Solution

( in millions)
Harley Davidson Amazon Walgreens
Net sales 4,915 1,07,006 1,17,351
Net PP & E 967.8 48,866 14,335
Fixed Asset turnover ( Net Sales / Net PP& E)              5.08       2.19             8.19
Historical cost 3,285.30 68,573 22,935
Annual depreciation 222 11,478 1,718
Total useful life ( Historical cost / Annual depreciation)            14.80       5.97           13.35
Remaining useful life ( Net PP&E / Annual depreciation              4.36       4.26             8.34
Age ( Acc depreciation Annual depreciation )            10.44       1.72             5.01

In case of Amazon the composition of PP&E mainly consist of majorily IT equipment followed by furnitures , hence there is High annual charge as compared to Harley Davidson and Walgreens

ekkarill92 answered 3 days ago
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