Case 6-34 (Static) Financial statement effects of depreciation methods LO 3 Answer the following questions: Required: a-1. Find the discussion of Property, Plant, and Equipment and depreciation methods used by Campbell's. Use data from the Campbell Soup Company annual report Straight line method Double declining method Written down value method i a-2. Why the particular method is used for the purpose described. Straight-line depreciation is used for financial reporting purposes because depreciation expense will be lower than under any of the accelerated depreciation methods. Straight-line depreciation is used for financial reporting purposes because depreciation expense will be higher than under any of the accelerated depreciation methods. a-3. What method do you think the company uses for income tax purposes? Accelerated depreciation using the MACRS rates is probably used for tax purposes to minimize taxes payable. Straight line Method using the MACRS rates is probably used for tax purposes to minimize taxes payable. a-3. What method do you think the company uses for income tax purposes? Accelerated depreciation using the MACRS rates is probably used for tax purposes to minimize taxes payable. Straight line Method using the MACRS rates is probably used for tax purposes to minimize taxes payable. Written down value Method using the MACRS rates is probably used for tax purposes to minimize taxes payable. b. Calculate the ratio of the depreciation and amortization expense for 2017 reported in the Consolidated Statements of Cash Flows. Supplemental Financial Statement Data to the total cost (not net book value) of property, plant, and equipment reported in the schedule. (Round your percentage answer to 1 decimal place. (eg 32.6)) Ratio % c. Based on the ratio calculated in part b and the depreciation method being used by Campbell's, what is the average useful life being used for its depreciation calculation? (Round your answer to 1 decimal place.) Average useful life years eciation and d. Assume that the use of an accelerated depreciation method for 2017 would have resulted in 25% more depreciation and amortization than reported by Campbell's at July 30, 2017. By what percentage would this have reduced the retained earnings amount reported at July 30, 2017? (Round your percentage answer to 1 decimal place. (eg 32.6)) Reduction in retained earnings % Net sales Costs and expenses Cost of products d Marking and selling expenses Administrative expenses Research and development expruses Other expenses/income) Restricting charges Total costs and expenses Earnings before interest and taxes latest expense Interest income Tanes on earnings Net earnings CAMPBELL SOUP COMPANY Consolidated Statements of Eathing (milos, except per share amosat) Less Net earnings (loss) attributable to noncontrolling interests. Net earnings attributable to Campbell Soup Company Per Share Bask Net earnings attributable to Campbell Soup Company Weighted average shares outstanding-basic Per Share Assuming Dilution Net earnings attributable to Campbell Soup Company Weighted average shares outstanding-assuming dilution. See accompanying Notes to Consolidated Financial Statements 2017 7,390 7,961 8041 of 4831 5181 3,300 193 641 601 " 124 117 238 131 34 18 31 102 6.490 7.001 7,028 1,400 900 1.054 112 115 108 4 1,293 549 949 406 286 283 857 563 666 5635 666 - $ 857 5 $ 2.915 1.825 2.13 305 309 312 2.89 5 115 2.13 307 311 315 CAMPBELL SOUP COMPANY Consolidated Balance Sheets (millions, except per share amounts) July 30, 2017 July 31. 2016 Current assets Cash and cash equivalents Accounts receivable, net Inventories Other current assets 319 $ 296 605 626 902 940 74 46 Total current assets. 1,900 1,908 Plant assets, net of depreciation 2,454 2,407 Goodwill. 2,115 2.263 Other intangible assets, net of amortization 1,118 1.152 Other assets ($51 as of 2017 and $34 as of 2016 attributable to variable interest entity) 139 107 Total assets $ 7.726 $ 7.837 Current liabilities Short-term borrowings. $ 1,037 $ 1,219 Payable to suppliers and others 666 610 Accrued liabilities 561 604 Dividends payable 111 100 Accrued income taxes Total current liabilities. Long-term debt. Deferred taxes. Other liabilities 20 221 2,395 2,555 2,499 2.314 490 396 697 1,039 6,081 6,304 Total liabilities... Commitments and contingencies Campbell Soup Company shareholders' equity Preferred stock; authorized 40 shares; none issued Capital stock, $.0375 par value; authorized 560 shares; issued 323 shares. 12 12 Additional paid-in capital. 359 354 Earnings retained in the business. 2,385 1,927 Capital stock in treasury, at cost. (1,066) (664) Accumulated other comprehensive loss. (53) (104) Total Campbell Soup Company shareholders' equity. 1,637 1,525 8 8 Noncontrolling interests... 1,645 1,533 Total equity Total liabilities and equity S 7.726 $ 7,837 wtime Concalidated Financial Statements CAMPBELL SOUP COMPANY Calidated Statements of Cash The art ramings to operating cash flow Ipament charges Suck band compemations Penson and portretireest benefit expense (income) Depreciation and amortization Deld come tas Oder, at Changes in working capital, net of acquisitions Acceivable Prepaid at Accus payable and accrued liabilities. Price fund contributions (48) (5) Net rigs Bom hedging activities. 2 Od (53) Net cash provided by operating activities 1,991 Cash News from investing activities Purchases of plant assets (338) Sales of plant assets Babes acquired art of cash acquered Other, set (30) 2017 ANT S 363 $ 666 212 . IN 102 00 (256) 318 93 18 28 46 (27) (18) & | 57 317 118 303 (10) (49) 15 12 (18) 10 30 6) 11 (58) (52) 1,491 1206 (341) (380) 15 (232) (0) Net cash med in investiar activides (368) (354) (603) 31 102 Stock-based compensation 60 0 57 Pession and postretirement benefit expense (income). (258) 387 118 Depreciation and amortization 303 Deleted income taxes (30) (40) Other, t 6 15 Changes in working capital, net of acquisitions Accounts receivable Inventories Prepaidass Accounts payable and accrued liabilities 28 34 12 59 (18) (27) 9 10 (4) 15 30 Pension flat contributions (2) () Net receipts from bedging activities : 4 11 Other (53) (5) (52) Net cash provided by operating activities 1.391 1,491 1.206 Cash dows from investing activities Purchases of plant t (338) (41) (180) Sales of plant asset $ 15 De acquired, set of cash acquind (232) Oder, ort (30) (110) Net cash used in investing activides (3) 0354) (601) Cash flows from financing activities Net short-terra borrowings (repaymests) 245 (162) 100 Long-term borrowings 211 215 300 Long-term repayments Repayments of netes payable. Desdends paid (90) (400) (109) (420) (190) (104) Treasury stock purchases. (437) (143) (244) Treasury stock issuances 2 2 9 Contributions broes noncontrolling interest 9. Payments related to tax withholding for stock-based compensation (22) (21) (1) Other ne (3) Net cash used in financing activities (911) (1,099) (550) Effect of exchange rate changes on cash 11 5 (32) Net change in cash and cash equivalents 23 43 21 Cash and cash equivalents-beginning of period. 296 253 232 Cash and cachalot