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# 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 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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