The Seagram Company Ltd.. with headquarters in Montreal. Quebec. Canada, operates in both the beverage and entertainment industries. Seagram produces well-known spirits and wines. In June 1995, Seagram purchased an 80 percent interest in MCA. Inc.. which produces and distributes motion picture, television, and home video products and recorded music: publishes books: and operates theme parks (Universal Studios) and retail stores. The purchase resulted in ^2.7 billion in goodwill. Since 1995, Seagram has undertaken a number of business acquisitions and divestitures (sales ofbusinesses)

as the company expands into the entertainment industry. Selected data from a recent annual report are as follows t. unis are in millions of U.S. dollars):

Required: 1. Compute the cost of the property, plant, and equipment at the end of the current year. Explain your answer. 2. What was the approximate age of the property, plant, and equipment at the end of the current year? 3. Compute the fixed asset turnover ratio for the current year. Explain your results. 4. What is Excess of Cost Over Fair Value of Assets Acquired? 5. On the consolidated statement of cash flows, why are the depreciation and amortization amounts added to income from continuing operations?

Transcribed Image Text:

PROPERTY, PLANT, EQUIPMENT, AND INTANGIBLES FROM THE CONSOLIDATED BALANCE SHEET Current Prior Year Year Film costs, net of amortization $1,272 $ 991 Artists' contracts, advances, and other entertainment assets Property, plant, and equipment, net 761 645 Excess of cost over fair value of assets acquired 2,733 3.076 2,559 3,355 Total revenues FROM THE CONSOLIDATED STATEMENT OF INCOME $9.714 FROM THE CONSOLIDATED STATEMENT OF CASH FLOWS $10,644 Income from continuing operations $ 880 $ 445 Adjustments Depreciation 289 265 Amortization 208 190 Other adjustments (summarized) (1,618) (256) Net cash provided by continuing operations (241) 644 FROM THE NOTES TO THE FINANCIAL STATEMENTS Accumulated depreciation on property, plant, and equipment $ 1,178 $ 1,023