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Chapter 11: Q10BE. (page 584)

In its 2014 annual report, Campbell Soup Company reports beginning-of-the-year total assets of \(8,113 million, end-of-the-year total assets of \)8,323 million, total sales of \(8,268 million, and net income of \)807 million. (a) Compute Campbell’s asset turnover. (b) Compute Campbell’s profit margin on sales. (c) Compute Campbell’s return on assets using (1) asset turnover and profit margin and (2) net income. (Round to two decimal places.)

Short Answer

Expert verified
  1. Asset turnover ratio = $1.006 times
  2. Profit margin = $9.76%
  3. Return on asset
  1. Return on asset = 9.76%
  2. Return on asset = 9.82%

Step by step solution

01

Meaning of Depreciation

Depreciation is a branch of accounting thatdeals with systematically spreading or dividing the cost or other principal value of a fixed assetover its expected useful life by charging regular expenses or revenues.

02

Computing Campbell’s asset turnover ratio

Calculating asset turnover ratio

03

(b) Computing Campbell’s profit margin on sales

Calculating profit margin on sale

04

(c 1) Computing Campbell’s return on assets using asset turnover and profit margin

05

(c 2) Computing Campbell’s return on assets net income

Calculating return on asset

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Most popular questions from this chapter

(Depreciation for Fractional Periods) On March 10, 2019, Lost World Company sells equipment that it purchased for \(192,000 on August 20, 2012. It was originally estimated that the equipment would have a life of 12 years and a salvage value of \)16,800 at the end of that time, and depreciation has been computed on that basis. The company uses the straight line method of depreciation.

Instructions

  1. (a) Compute the depreciation charge on this equipment for 2012, for 2019, and the total charge for the period from 2013 to 2018, inclusive, under each of the six following assumptions with respect to partial periods.
    1. Depreciation is computed for the exact period of time during which the asset is owned. (Use 365 days for base and record depreciation through March 9, 2019.)
    2. Depreciation is computed for the full year on the January 1 balance in the asset account.
    3. Depreciation is computed for the full year on the December 31 balance in the asset account.
    4. Depreciation for one-half year is charged on plant assets acquired or disposed of during the year.
    5. Depreciation is computed on additions from the beginning of the month following acquisition and on disposals to the beginning of the month following disposal.
    6. Depreciation is computed for a full period on all assets in use for over one-half year, and no depreciation is charged on assets in use for less than one-half year. (Use 365 days for base.)
  2. (b) Briefly evaluate the methods above, considering them from the point of view of basic accounting theory as well as simplicity of application.

Silverman Company purchased machinery for \(162,000 on January 1, 2017. It is estimated that the machinery will have a useful life of 20 years, salvage value of \)15,000, production of 84,000 units, and working hours of 42,000. During 2017, the company uses the machinery for 14,300 hours, and the machinery produces 20,000 units. Compute depreciation under the straight-line, units-of-output, working hours, sum-of-the-years’-digits, and double-declining-balance methods.

(Composite Depreciation) Presented below is information related to LeBron James Manufacturing Corporation.

Asset

Cost

Estimated Salvage

Estimated Life (in years)

A

\(40,500

\)5,500

10

B

33,600

4,800

9

C

36,000

3,600

9

D

19,000

1,500

7

E

23,500

2,500

6

Instructions

  1. Compute the rate of depreciation per year to be applied to the plant assets under the composite method.
  2. Prepare the adjusting entry necessary at the end of the year to record depreciation for the year.
  3. Prepare the entry to record the sale of asset D for cash of $4,800. It was used for 6 years, and depreciation was entered under the composite method.

Question: Hayes Company sold 10,000 shares of Kenyon Co. commonstock for \(27.50 per share, incurring \)1,770 in brokeragecommissions. These securities originally cost $260,000.Prepare the entry to record the sale of these securities.

In its 2014 annual report, Campbell Soup Company reports beginning-of-the-year total assets of \(8,113 million, end-of-the-year total assets of \)8,323 million, total sales of \(8,268 million, and net income of \)807 million.

(a) Compute Campbell’s asset turnover.

(b) Compute Campbell’s profit margin on sales.

(c) Compute Campbell’s return on assets using

(1) asset turnover and profit margin and

(2) net income. (Round to two decimal places.)
See all solutions

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