Fixed Asset Depreciation- Cisco & Funseth Farms Examples
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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.
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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.
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 ...
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