Reggie Corporation and Baxter Corporation, two corporations of roughly the same size, are both involved in the manufacture of in-line skates. Each company depreciates its plant assets using the straight-line approach. An investigation of their financial statements reveals the information:

Instructions

(a) For each company, calculate these values:
(1) Average age of plant assets.
(2) Average useful life.
2 Asset turnover ratio.
a > Based on your calculations in part (a), comment on the relative effectiveness of the two companies in using their assets to generate sales. What factors complicate your ability to compare the two companies?

Transcribed Image Text:

Net income Sales Total assets (average) Plant assets (average) Accumulated depreciation. Reggie Corp. $ 800,000 Baxter Corp. $1,000,000 1,600,000 1,300,000 2,500,000 1,700,000 1,400,000 1,200,000 500,000 825,000 Depreciation expense 120,000 31,250 Intangible assets (goodwill) 600,000 0 Amortization expense 60,000 0