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P8-38. 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 flow statement for fiscal 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 flows. (Note some numbers were added to make the disclosure complete.) 2013 $71,279 71,279 50,039 14,465 Consolidated Statements of Operations ($ millions) 2014 Sales. $72,618 Credit card revenues. Total revenues 72,618 Cost of sales... 51,278 Selling, general and administrative expenses 14,676 Credit card expenses. Depreciation and amortization. 2,129 Gain on receivables transaction.. Earnings from continuing operations before interest expense and income taxes 4,535 Net interest expense. 882 Earnings from continuing operations before income taxes 3,653 Provision for income taxes. 1,204 Net earnings from continuing operations .. 2,449 Discontinued operations, net of tax.. (4,085) Net (loss)/earnings. $ (1636) 2012 $71,960 1,341 73,301 50,568 14,643 467 2,044 (161) 1,996 (391) 5,170 1049 5,740 684 4,121 1.427 2,694 (723) $ 1,971 5,056 1741 3,315 (316) $ 2,999 February 1, 2014 Consolidated Statements of Financial Position (Asset Section Only) January 31, ($ millions) 2015 Assets Cash and cash equivalents, including short-term investments of $1,520 and $3....... $ 2,210 Inventory....... 8,790 Assets of discontinued operations 1333 Other current assets 1754 Total current assets.. 14,087 Property and equipment Land....... 6,127 Buildings and improvements 26,614 Fixtures and equipment...... 5,346 Computer hardware and software. 2,553 Construction-in-progress..... 424 Accumulated depreciation.. (15,106) Property and equipment, net .... 25,958 Noncurrent assets of discontinued operations 442 Other noncurrent assets..... 917 Total assets $41,404 $ 670 8,278 793 1,832 11,573 6,143 25,984 5,199 2,395 757 (14,006) 26,412 5,461 1107 $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, $1975 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 $650 in 2012. Facility pre-opening costs, including supplies and payroll, are expensed as incurred. Estimated Useful Lives Buildings and improvements....... Fixtures and equipment...... Computer hardware and software.. Life (in years) 8-39 2-15 2-7 Long-lived assets are reviewed for impairment when events or changes in circumstances, such as a decision to relocate or close a store or make significant software changes, indicate that the asset's carrying value may not be recoverable. For asset groups classified as held for sale, the carrying value is compared to the fair value less cost to sell. We estimate fair value by obtaining market appraisals, valuations from third party brokers or other valuation techniques. 16 Impairments ($ millions) 2014 2013 2012 Impairments included in segment SG&A. $108 $58 $37 Unallocated impairments....... 19 Total impairments....... $124 $77 $37 REQUIRED 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.) h. Estimate the amount of property and equipment that was acquired through non-cash transactions
