Analyzing PPE Accounts and Recording PPE Transactions, Including Discontinued Operations

The 2014 and 2013 income statements and balance sheets (asset section only) for Target Corporation follow, along with its footnote describing Target's accounting for property and equip-ment. Target's cash ow statement for scal 2014 reported capital expenditures of $1,786 million and disposal proceeds for property and equipment of $95 million. No gain or loss was reported on property and equipment disposals. In addition, Target acquired property and equipment through non-cash acquisitions not reported on the statement of cash ows.

Consolidated Statements of Operations

($ millions) 2014 20132012 Sales.................................................... $72,618$71,279 $71,960

Credit card revenues..................................... 1,341

Total revenues ...........................................$72,618 $71,279 $73,301

Cost of sales............................................. $51,278 $50,039 $50,568

Selling, general and administrative expenses ........$14,676 $14,465 $14,643

Credit card expenses..................................... 467

Depreciation and amortization............................$2,129 $1,996 $2,044

Gain on receivables transaction...........................(391) (161)

Earnings from continuing operations before interest

expense and income taxes .............................$4,535 $5 ,170 $5,740

Net interest expense ..................................... $882$1,049 $684

Earnings from continuing operations before

income taxes .......................................... $3,653 $4,121$45,056

Provision for income taxes................................ $1,204$1,427 $1,741

Net earnings from continuing operations .................. $2,449$2 ,694 $3,315

Discontinued operations, net of tax........................ (4,085)(723) (316)

Net (loss)/earnings.......................................$(1,636) $1,971 $2,999

Consolidated Statements of Financial Position (Asset Section Only)

($ millions) January 31, 2015February 1, 2014

AssetsCash and cash equivalents, including

short-term investments of $1,520 and $3 . . . . . . . . . . . . . . . . $2,210 $ 670

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,790 8,278

Assets of discontinued operations. . . . . . . . . . . . . . . . . . . . . . . 1,333 793

Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,7541,832

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,087 11,573

Property and equipment

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,127 6,143

Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,614 25,984

Fixtures and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,346 5,199

Computer hardware and software. . . . . . . . . . . . . . . . . . . . . . 2,553 2,395 Construction-in-progress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .424 757Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . (15,106)(14,066)Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . .25,958 26,412

Noncurrent assets of discontinued operations. . . . . . . . . . . . . .442 5,461

Other noncurrent assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9171,107

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $41,404 $44,553

12. Property and Equipment

Property and equipment is depreciated using the straight-line method over estimated useful lives or lease terms if shorter. We amortize leasehold improvements purchased after the beginning of the initial lease term over the shorter of the assets' useful lives or a term that includes the original lease term, plus any renewals that are reasonably assured at the date the leasehold improvements are acquired. Depreciation expense for 2014, 2013 and 2012 was $2,108 million, $1,975 million and $2,027 million, respectively. For income tax pur-poses, accelerated depreciation methods are generally used. Repair and maintenance costs are expensed as incurred and were $715 million in 2014, $643 million in 2013, and $650 in 2012. Facility pre-opening costs, including supplies and payroll, are expensed as incurred.

Estimated Useful Lives Life (in years)

Buildings and improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-39

Fixtures and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-15

Computer hardware and software. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

Long-lived assets are reviewed for impairment when events or changes in circumstances, such as a decision to relocate or close a store or make significant software changes, indicate that the asset's carrying value may not be recoverable. For asset groups classified as held for sale, the carrying value is compared to the fair value less cost to sell. We estimate fair value by obtaining market appraisals, valuations from third party brokers or other valuation techniques.

Impairments ($ millions) 2014 2013 2012

Impairments included in segment SG&A .......................... $108 $58 $37

Unallocated impairments ......................................... 16 19

Total impairments ................................................ $124 $77 $37

a.Prepare journal entries to record the following for 2014:

i.Depreciation expense

ii.Capital expenditures

iii.Disposal of property, plant, and equipment

iv.Repair and maintenance costs v.Impairments and write-downs (Assume that impairments and write-downs reduce the property and equipment account, rather than increasing accumulated depreciation.)

b.Estimate the amount of property and equipment that was acquired through non-cash transactions.