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Chapter 11: Q11-10BE (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

Step-by-Step SolutionStep 1: Meaning of Depreciation

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

02

(a) Computing Campbell’s asset turnover ratio

Calculating asset turnover ratio

Asset turnover ratio=Net salesAverage Total Asset=$8,268$8,218=1.006 times

03

(b) Computing Campbell’s profit margin on sales

Calculating profit margin on sales

Profit margin=Net incomeNet sales×100=$807$8,268×100=9.76%

04

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

Calculating return on asset

Rate of return on asset=Asset turnover×Profit margin on sales=1.006×9.76%=9.82%

05

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

Calculating return on asset

Rate of return on assets=Net incomeAverage total assets×100=$807$8,218×100=9.82%

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Most popular questions from this chapter

Andrea Torbert purchased a computer for \(8,000 on July 1, 2017. She intends to depreciate it over 4 years using the double-declining-balance method. Salvage value is \)1,000. Compute depreciation for 2018.

Francisco Corporation is constructing a new building at a total initial cost of \(10,000,000. The building is expected to have a useful life of 50 years with no residual value. The building’s finished surfaces (e.g., roof cover and floor cover) are 5% of this cost and have a useful life of 20 years. Building services systems (e.g., electric, heating, and plumbing) are 20% of the cost and have a useful life of 25 years. The depreciation in the first year using component depreciation, assuming straight-line depreciation with no residual value, is:

  1. \)200,000.
  2. \(215,000.
  3. \)255,000.
  4. None of the above.

(Depreciation Computations—Five Methods) Jon Seceda Furnace Corp. purchased machinery for \(315,000 on May 1, 2017. It is estimated that it will have a useful life of 10 years, salvage value of \)15,000, production of 240,000 units, and working hours of 25,000. During 2018, Seceda Corp. uses the machinery for 2,650 hours, and the machinery produces 25,500 units.

Instructions

From the information given, compute the depreciation charge for 2018 under each of the following methods. (Round to the nearest dollar.)

  1. Straight-line.
  2. Units-of-output.
  3. Working hours.
  4. Sum-of-the-years’-digits.
  5. Declining-balance (use 20% as the annual rate)

Use the information for Lockard Company given in BE11-2. (a) Compute 2017 depreciation expense using the sum-of-the-years’-digits method. (b) Compute 2017 depreciation expense using the sum-of-the-years’-digits method, assuming the machinery was purchased on April 1, 2017.

Lockard Company purchased machinery on January 1, 2017, for \(80,000. The machinery is estimated to have a salvage value of \)8,000 after a useful life of 8 years.

Tanaka Company has land that cost \(15,000,000. Its fair value on December 31, 2017, is \)20,000,000. Tanaka chooses the revaluation model to report its land. Explain how the land and its related valuation should be reported.
See all solutions

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