IN-CLASS EXERCISE #8 Part A: Hoosiers Company operates in both the beverage and entertainment industries. In August 2016, Hoosiers purchased Hawkeyes, Inc., which produces and distributes motion picture, television, and home video products and recorded music; publishes books; and operates theme parks and retail stores. The purchase resulted in $3.8 billion in goodwill. Since 2015, Hoosiers has undertaken several business acquisitions and divestitures (sales of businesses) as the company expands into the entertainment industry. Selected data from a recent annual report are as follows (amounts are in U.S. dollars in millions): 2018 2017 Property, Plant, Equipment, and Intangibles From the Consolidated Balance Sheet Film costs, net of amortization Artists' contracts, advances, and other entertainment assets Property, plant, and equipment, net Goodwill $1,272 761 2,733 3,076 $991 645 2,559 3,355 $9,714 $10644 From the Consolidated Statement of Income Total revenues From the Notes to the Financial Statements Accumulated depreciation on property, plant and equipment Depreciation expense Amortization expense $1,178 289 208 $1,023 265 190 Required: 1. Compute the cost of the property, plant, and equipment at the end of 2018. Explain your answer. 2. Attempt to approximate the age of the property, plant, and equipment at the end of 2018 (assume the firm uses straight-line depreciation). Show your work. 3. What does the "goodwill at the end of 2018 represent? Part B: Part B: Sparty Goods reported the following on its 12/31/2019 balance sheet: In millions Property and Equipment, at cost Less: Accumulated Depreciation Property and equipment, net 12/31/2019 $14,500 6,000 $8,500 12/31/2018 $13,000 5,000 $8,000 Assume in 2019, Sparty had no asset impairment write-offs but did buy and some sell property and equipment. The property and equipment that it sold in 2019 for $550 million had originally cost Sparty $800 million and Sparty recognized a $80 million gain on the sale. Required: 1. What was the amount of depreciation expense recorded in 2019? Hint: you need to figure out how much accumulated depreciation there was on the property and equipment sold in 2019. 2. Assume Sparty mistakenly recognized depreciation expense that was half of what it should have been in 2019. Indicate the effect of the error (i.e., over or understated) on the following ratios as of 12/31/2019: a. EPS b. Fixed asset turnover c. Current ratio