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 Targets accounting for property and equipment. Targets 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 to loss was reported on property and equipment disposals. In addition, Target acquired property and equipment through noncash acquisitions not reported on the statement of cash flows. (Note some numbers were added to make the disclosure complete)

Consolidated Statements of Operations

($ millions) 2014 2013 2012

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, 2015 February 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,754 1,832

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .424 757

Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . (15,106) (14,066)

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . .25,958 26,412

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

Other noncurrent assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 917 1,107

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

1. Compute the PPE turnover for 2014. Assuming an average PPE turnover of 4.0 for the companys closest competitors, does General Mills appear to be capital intensive?