Anаlyzing PPE Accоunts аnd Recоrding PPE Trаnsactiоns, Including Discontinued Operations The 2019 and 2018 income statements and balance sheets (asset section only) for Target Corporation (the Company) follow, along with its note disclosure describing Target's accounting for property and equipment. Target's statement of cash flows for fiscal 2019 (fiscal year ended February 1, 2020) reported capital expenditures of $3,027 million and disposal proceeds for property and equipment of $63 million. No gain or loss was reported on property and equipment disposals. In addition, Target acquired property and equipment through non-cash acquisitions not reported on the statement of cash flows. Consolidated Statements of Operations ($ millions) 2019 2018 Sales $77,130 $74,433 Other revenue 982 923 Total revenues 78,112 75,356 Cost of sales 54,864 53,299 Selling, general, and administrative expenses 16,233 15,723 Depreciation and amortization (exclusive of depreciation included in cost of sales) 2,357 2,224 Operating income 4,658 4,110 Net interest expense 477 461 Net other (income)/expense (9) (27) Earnings from continuing operations before income taxes 4,190 3,676 Provision for income taxes 921 746 Net earnings from continuing operations 3,269 2,930 Discontinued operations, net of tax 12 7 Net earnings $3,281 $2,937 Consolidated Statements of Financial Position (Asset Section Only) ($ millions) February 1, 2020 February 2, 2019 Assets Cash and cash equivalents $2,577 $1,556 Inventory 8,992 9,497 Other current assets 1,333 1,466 Total current assets 12,902 12,519 Property and equipment Land 6,036 6,064 Buildings and improvements 30,603 29,240 Fixtures and equipment 6,083 5,912 Computer hardware and software 2,692 2,544 Construction-in-progress 533 460 Accumulated depreciation (19,664) (18,687) Property and equipment, net 26,283 25,533 Operating lease assets 2,236 1,965 Other noncurrent assets 1,358 1,273 Total assets $42,779 $41,290 11. Property and Equipment Property and equipment, including assets acquired under finance leases, is depreciated using the straight-line method over estimated useful lives or lease terms if shorter. We amortize leasehold improvements purchased after the beginning of the initial lease term over the shorter of the assets’ useful lives or a term that includes the original lease term, plus any renewals that are reasonably certain at the date the leasehold improvements are acquired. Depreciation expense for 2019, 2018, and 2017 was $2,591 million, $2,460 million, and $2,462 million, respectively, including depreciation expense included in Cost of Sales. For income tax purposes, accelerated depreciation methods are generally used. Repair and maintenance costs are expensed as incurred. Facility pre-opening costs, including supplies and payroll, are expensed as incurred. We review long-lived assets for impairment when store performance expectations, events, or changes in circumstances—such as a decision to relocate or close a store or distribution center, discontinue a project, or significant software changes—indicate that the asset’s carrying value may not be recoverable. We recognized impairment losses of $23 million, $92 million, and $91 million during 2019, 2018, and 2017, respectively . . . Impairments are recorded in Selling, General, and Administrative Expenses. REQUIRED a. Prepare journal entries to record the following for fiscal 2019: i. Depreciation expense ii. Capital expenditures iii. Disposal of property, plant, and equipment iv. Impairments and write-downs (Assume that impairments and write-downs reduce the property and equipment account, rather than increasing accumulated depreciation.) Ref. Account Debit ($ millions) Credit ($ millions) i. {#1} {#2} ii. {#3} {#4} iii. {#5} {#6} {#7} iv. {#8} {#9} b. Estimate the amount of property and equipment that was acquired, if any, through non-cash transactions. ${#10} million of property and equipment was acquired through non-cash transactions.
Cоmputing Depreciаtiоn, Asset Bоok Vаlue, аnd Gain or Loss on Asset Sale (FSET) Sloan Company uses its own executive charter plane that originally cost $1,200,000. It has recorded straight-line depreciation on the plane for 6 full years, with a $120,000 expected salvage value at the end of its estimated 10 year useful life. Sloan disposes of the plane at the end of Year 6. a. Determine the following as of the disposal date: Accumulated depreciation ${#1} Net book value ${#2} b. Using the financial statement effects template, show how the disposal of the plane affects the balance sheet and income statement, assuming that the sales price is: 1. Cash equal to the book value of the plane. 2. $300,000 cash. 3. $900,000 cash. Balance Sheet Income Statement Cash Noncash Contra Contributed Earned Net Sale price options Asset + Assets - Assets = Liabilities + Capital + Capital Revenues - Expenses = Income 1 {#3} {#4} {#5} {#6} {#7} {#8} {#9} {#10} {#11} 2 {#12} {#13} {#14} {#15} {#16} {#17} {#18} {#19} {#20} 3 {#21} {#22} {#23} {#24} {#25} {#26} {#27} {#28} {#29}
Interpreting аnd Repоrting Prоperty, Plаnt, аnd Equipment (PPE) Expenditures (FSET) General Mills, Inc. (the Cоmpany), is a global consumer foods company. The firm manufactures and sells a wide range of branded products and is a major supplier to the foodservice and baking industries. The company’s core product areas are ready-to-eat cereal, super-premium ice cream, convenient meal solutions, and healthy snacking. The following data are taken from the company’s 2020 annual report. From the balance sheet: ($ millions) May 31, 2020 May 26, 2019 Equipment $6,428.0 $6,548.3 Buildings 2,412.6 2,477.2 Capitalized software 668.5 631.6 Construction in progress 373.5 343.8 Land 66.1 73.6 Equipment under finance lease 5.8 5.7 Buildings under finance lease 0.3 0.3 Total land, buildings, and equipment 9,954.8 10,080.5 Less accumulated depreciation (6,374.2) (6,293.3) Total $3,580.6 $3,787.2 From the income statement ($ millions): 2020 2019 Net sales $17,626.6 $16,865.2 The Company reported depreciation and amortization (not reported separately) expense of approximately $594.7 million in 2020. Estimate the average useful life of its depreciable assets by dividing average depreciable assets by depreciation expense. During 2020, the Company purchased $460.8 million of land, buildings, and equipment for cash. REQUIRED Prepare journal entries to record the asset purchases and the year’s depreciation expense. Ref. Account Debit ($ millions) Credit ($ millions) a. {#1} {#2} b. {#3} {#4}
Cоmputing аnd Recоrding Prоceeds from the Sаle of PPE The following informаtion was provided in the 2020 10-K of Hilton Worldwide Holdings, Inc. Note 7: Property and Equipment ($ millions) 2020 2019 Property and equipment, gross $832 $889 Accumulated depreciation and amortization (486) (509) Property and equipment, net $346 $380 During the year ended December 31, 2020, we recognized $28 million of impairment losses related to property and equipment, including $4 million for finance lease ROU assets, which reduced the gross carrying value of property and equipment by $119, including finance lease ROY assets by $42 million, and the accumulated depreciation and amortization by $91 million, including finance lease ROU assets by $38 million. Note 7 also revealed that depreciation and amortization expense on property and equipment totaled $57 million in 2020. The statement of cash flows reported that expenditures for property and equipment totaled $46 million in 2020 and that there were neither proceeds nor gain or loss on the sale of property and equipment during the year. 1. Using the information provided, prepare a journal entry and record in the FSET: a. the acquisition of new property and equipment during the year; b. the depreciation and amortization expense for the year; c. the impairment of the company's property and equipment during the year. Account Debit Credit {#1} {#2} {#3} {#4} {#5} {#6} {#7} ($ millions) Balance Sheet Income Statement Cash Noncash Contra Contributed Earned Net Transaction Asset + Assets - Assets = Liabilities + Capital + Capital Revenues - Expenses = Income a. Acquisition of PPE {#8} {#9} {#10} {#11} {#12} {#13} {#14} {#15} {#16} b. Depreciation {#17} {#18} {#19} {#20} {#21} {#22} {#23} {#24} {#25} c. Impairment of PPE {#26} {#27} {#28} {#29} {#30} {#31} {#32} {#33} {#34}