McDonald?s is the largest and best-known global food-service retailer, with more than 32,000 restaurants in over 115 countries. On any day, McDonald?s serves approximately 1 percent of the world?s population. The following is information related to McDonald?s property and equipment.

Instructions

a. What method of depreciation does McDonald?s use?

b. Does depreciation and amortization expense cause cash flow from operations to increase? Explain.

c. What does the schedule of cash flow measures indicate?

Transcribed Image Text:

McDonald's Corporation Summary of Significant Accounting Policies Section Property and Equipment. Property and equipment are stated at cost, with depreciation and amortization provided using the straight-line method over the following estimated useful lives: buildings-up to 40 years; leasehold improvements-the lesser of useful lives of assets or lease terms, which generally include option - periods; and equipment-three to 12 years. [In the notes to the financial statements:] Property and Equipment Net property and equipment consisted of: December 31 (In millions) 2017 2016 $ 5,662.2 $ 5,465.0 13,695.2 Land Buildings and improvements on owned land Buildings and improvements on leased land Equipment, signs and seating 14,776.9 12,509.2 11,511.9 3,165.7 3,270.9 Other 512.4 500.4 36,626.4 34,443.4 Accumulated depreciation and amortization 14,178.1 13,185.8 Net property and equipment $22,448.3 $21,257.6 Depreciation and amortization expense for property and equipment was (in millions): 2017–$1,227.5; 2016–$1,390.7; 2015–$1,438.0. [In its 6-year summary, McDonald's provides the following information.] (in millions) 2017 2016 2015 Cash provided by operations Capital expenditures $5,551 $6,060 $6,539 1,854 1,821 1,814