10:14 7 Chapter 12 Noncurrent Assets Case Study CS-1 LO 3 6 7 Upmount Inc. reported the following information on their annual financial statements (all numbers are in millions). Year End Year End September 30, 2018 September 30, 2017 Net Sales $233,715 $182,795 Net Income 53,394 39,510 An excerpt from its balance sheet and notes to the financial statements is presented below. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and per value) September September 30, 2018 30, 2017 Assets Current assets Cash and cash equivalents $21,120 $13,844 Short-term marketable securities 20,481 11,233 Accounts receivable, less allowances of $82 and $86, respectively 16.849 17,460 Inventories 2,349 2,111 Deferred tax assets 5.546 4,318 Vendor non-trade receivables 13,494 9,759 Other current assets 9.539 9.806 Total current assets 89,378 68,531 Long-term marketable securities 164,065 130,162 Property, plant and equipment, net 22.471 20,624 Goodwill 5,116 4,616 Acquired intangible assets, net 3,893 4,142 Other assets 5.556 3.764 Total Assets $290 479 $231.839 Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which for buildings is the lesser of 30 years or the remaining life of the building; between one to five years for machinery and equipment; and the shorter of lease terms or 10 years for leasehold improvements. Depreciation and amortization expenses on property and equipment was $9.2 billion, $6.9 billion and $5.8 billion during 2018, 2017 and 2016, respectively. Noncurrent Assets Including Goodwill and Other Acquired Intangible Assets Upmount reviews property, plant and equipment, and certain identifiable intangibles, excluding goodwill, for impairment. If property, plant and equipment, and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value.10:14 7 Upmount does not amortize goodwill and intangible assets with indefinite useful lives. rather such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. Upmount performs its goodwill and intangible asset impairment tests in the fourth quarter of each year. Upmount did not recognize any impairment charges related to goodwill or indefinite lived intangible assets during 2018, 2017 and 2016. Upmount amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment. Upmount typically amortizes its acquired assets with definite useful lives over periods from three to seven years. Note 3 - Consolidated Financial Statement Details The following tables shows Upmount's consolidated financial statement details as of September 30, 2018 and September 30, 2017 (in millions): Property, Plant and Equipment, Net 2018 2017 Land and buildings $6.956 $4,863 Machinery, equipment and internal-use software 37,038 29,639 Leasehold improvements 5.263 4.513 Gross property, plant and equipment 49.257 39,015 Accumulated depreciation and amortization (26.786) (18.391) Total property, plant and equipment $22,471 $20.624 Required a) Noncurrent assets make up what percentage of total assets in 20187 b) What method of depreciation does Upmount use? How many years does Upmount depreciate machinery and equipment? c) What is the value of goodwill in Upmount at the end of 2018? Did Upmount write off any impairment on goodwill in 20187 d) Calculate the return on assets for 2018. What does it mean? e) Calculate the asset turnover for 2018. What does it mean?E F G H A B C D ACC 231 2 CH 12 Case Study CS-1 on workbook pp 504-505 4 5 Part a - Noncurrent assets make up what percentage of total assets in 2018? Points: 6 1 7 8 9 10 Part b1 - What method of depreciation does Upmount use? 11 12 13 Part b2 - How many years does Upmount depreciate machinary and equipment? 14 15 16 Part c1 - What is the value of Goodwill? 17 18 19 Part c2 - Did Upmont write off any Goodwill? 20 21 22 Part c3 - What is Goodwill? Describe Goodwill in your own words. 23 24 25 26 Part c4 - Is Goodwill depreciated (yes or no)? 27 Parts a and b Sheet1 + Edit22 Part c3 - What is Goodwill? Describe Goodwill in your own words. 23 24 25 26 Part c4 - Is Goodwill depreciated (yes or no)? 27 28 29 Part d1 - Calculate the return on assets for 2018. 30 31 32 33 34 Part d2 - What does the return on assets percentage above mean? 35 0.5 36 37 38 Part e1 - Calculate asset turnover for 2018. 39 40 41 42 43 Part e2 - What does the turnover number above mean? 44 0.5 45 46 47 48 10 Parts a and b Sheet1 +