Refer to the financial statements of The Home Depot in Appendix A and Lowe's in Appendix B at the end of this book, or download the annual reports from the Cases section of the text's Web site at www.mhhe.com/phillips4e .
Required:
1. What method of depreciation does Lowe's use?
2. Refer to Note 4 in Lowe's annual report. What amount of Accumulated Depreciation did Lowe's report at January 28, 2011? What percentage is this of the total cost of property and equipment? Is this a larger (or smaller) percentage of the total cost of property and equipment than for The Home Depot (in S9-1)? What does it suggest to you about the length of time the assets have been depreciated?
3. Lowe's estimated useful life of buildings is shorter than that estimated by The Home Depot.
How will this affect the fixed asset turnover ratios of the two companies?
4. What amount of Depreciation Expense was reported on Lowe's income statement for the year ended January 28, 2011? What percentage of net sales is it? Compare this percentage to that of The Home Depot and describe what this implies about the two companies' operations.
5. What is Lowe's fixed asset turnover ratio for the current year? Compare this ratio to that of The Home Depot and describe what it implies about the operations of the two companies.