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Fixed Asset Depreciation- Cisco & Funseth Farms Examples

10-12

Cisco System reported the following information in its 2009 financial statements ($ in millions):

2009 2008
Balance sheets $4,043 $4,151
Property, plant, and equipment (net)
Income statement $36,117
Net sales for 2009

Required

1. Calculate Cisco's 2009 fixed-asset turnover ratio
2. How would you interpret this ratio?

10-13

Funseth Farms, purchased a tractor in 2008 at a cost of $30,000. The tractor was sold for $3,000 in 2011. Depreciation recorded through the disposal date totaled $26,000.

1. Prepare the journal entry to record the sale.
2. Assuming that the tractor was sold for $10,000, prepare the journal entry to record the sale.

Solution Preview

See attached file.

10-12.1 Calculate Cisco's 2009 fixed-asset turnover ratio
Fixed-asset turnover ratio is calculated by dividing net sales by net property, plant, and equipment.
FAT Ratio= NET Sales/Property, plant, equipment
Cisco 2009 FAT Ratio= 36,117 / 4,043
Cisco 2009 FAT Ratio= 8.93

Cisco 2008 FAT Ratio= 39,540/4,151
Cisco 2008 FAT Ratio= 9.52

10-12.2 Calculate Cisco's 2009 fixed-asset turnover ratio
Comparing FAT ratio from year to year illustrates the effectiveness of investment in physical capital, or general sales ...

Solution Summary

Detailed decription of how to calculate fixed-asset turnover ratio and capital depreciation for financial accounting. Uses Cisco annual reports, and Funseth Farms hypothetical example to illustrate. References included.

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