Problem 2: (10 points) Refer to the balance sheet, note 1 (Property and Equipmen
ID: 2445930 • Letter: P
Question
Problem 2: (10 points)
Refer to the balance sheet, note 1 (Property and Equipment), and note 9 (taxes) of Wal-Mart in Appendix.
Required:
Compute the average total depreciable life of assets in use for Wal-Mart at the end of Jan 31, 2015.
Compute the average age to date of depreciable assets in use for Wal-Mart at the end of Jan 31, 2015.
Compute the remaining useful life of depreciable assets in use for Wal-Mart at the end of Jan 31, 2015.
Compute the amount the company would report for property, plant, and equipment (net) at the end of the year if it had used tax reporting depreciation instead of financial reporting depreciation.
Compute the amount of depreciation expense recognized for tax purposes for fiscal 2015 using the amount of the deferred taxes liability related to deprecation timing differences.
Appendix
Wal-Mart Stores, Inc.
Consolidated Balance Sheets
As of January 31,
(Amounts in millions)
2015
2014
ASSETS
Current assets:
Cash and cash equivalents
$
9,135
$
7,281
Receivables, net
6,778
6,677
Inventories
45,141
44,858
Prepaid expenses and other
2,224
1,909
Current assets of discontinued operations
—
460
Total current assets
63,278
61,185
Property and equipment:
Property and equipment
177,395
173,089
Less accumulated depreciation
(63,115
)
(57,725
)
Property and equipment, net
114,280
115,364
Property under capital leases:
Property under capital leases
5,239
5,589
Less accumulated amortization
(2,864
)
(3,046
)
Property under capital leases, net
2,375
2,543
Goodwill
18,102
19,510
Other assets and deferred charges
5,671
6,149
Total assets
$
203,706
$
204,751
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND EQUITY
Current liabilities:
Short-term borrowings
$
1,592
$
7,670
Accounts payable
38,410
37,415
Accrued liabilities
19,152
18,793
Accrued income taxes
1,021
966
Long-term debt due within one year
4,810
4,103
Obligations under capital leases due within one year
287
309
Current liabilities of discontinued operations
—
89
Total current liabilities
65,272
69,345
Long-term debt
41,086
41,771
Long-term obligations under capital leases
2,606
2,788
Deferred income taxes and other
8,805
8,017
Redeemable noncontrolling interest
—
1,491
Commitments and contingencies
Equity:
Common stock
323
323
Capital in excess of par value
2,462
2,362
Retained earnings
85,777
76,566
Accumulated other comprehensive income (loss)
(7,168
)
(2,996
)
Total Walmart shareholders' equity
81,394
76,255
Nonredeemable noncontrolling interest
4,543
5,084
Total equity
85,937
81,339
Total liabilities, redeemable noncontrolling interest, and equity
$
203,706
$
204,751
See accompanying notes.
Note 1. Summary of Significant Accounting Policies
......
Property and Equipment
Property and equipment are stated at cost. Gains or losses on disposition are recognized as earned or incurred. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred. The following table summarizes the Company's property and equipment balances and includes the estimated useful lives that are generally used to depreciate the assets on a straight-line basis:
Fiscal Years Ended January 31,
(Amounts in millions)
Estimated Useful Lives
2015
2014
Land
N/A
$
26,261
$
26,184
Buildings and improvements
3-40 years
97,496
95,488
Fixtures and equipment
2-30 years
45,044
42,971
Transportation equipment
3-15 years
2,807
2,785
Construction in progress
N/A
5,787
5,661
Property and equipment
$
177,395
$
173,089
Accumulated depreciation
(63,115
)
(57,725
)
Property and equipment, net
$
114,280
$
115,364
Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the remaining expected lease term. Depreciation expense for property and equipment, including amortization of property under capital leases, for fiscal 2015, 2014 and 2013 was $9.1 billion, $8.8 billion and $8.4 billion, respectively. Interest costs capitalized on construction projects were $59 million, $78 million and $74 million in fiscal 2015, 2014 and 2013, respectively.
Note 9. Taxes
Income from Continuing Operations
The components of income from continuing operations before income taxes are as follows:
Fiscal Years Ended January 31,
(Amounts in millions)
2015
2014
2013
U.S.
$
18,610
$
19,412
$
19,352
Non-U.S.
6,189
5,244
6,310
Total income from continuing operations before income taxes
$
24,799
$
24,656
$
25,662
A summary of the provision for income taxes is as follows:
Fiscal Years Ended January 31,
(Amounts in millions)
2015
2014
2013
Current:
U.S. federal
$
6,165
$
6,377
$
5,611
U.S. state and local
810
719
622
International
1,529
1,523
1,743
Total current tax provision
8,504
8,619
7,976
Deferred:
U.S. federal
(387
)
(72
)
38
U.S. state and local
(55
)
37
(8
)
International
(77
)
(479
)
(48
)
Total deferred tax expense (benefit)
(519
)
(514
)
(18
)
Total provision for income taxes
$
7,985
$
8,105
$
7,958
Deferred Taxes
The significant components of the Company's deferred tax account balances are as follows:
January 31,
(Amounts in millions)
2015
2014
Deferred tax assets:
Loss and tax credit carryforwards
$
3,255
$
3,566
Accrued liabilities
3,395
2,986
Share-based compensation
184
126
Other
1,119
1,573
Total deferred tax assets
7,953
8,251
Valuation allowances
(1,504
)
(1,801
)
Deferred tax assets, net of valuation allowance
6,449
6,450
Deferred tax liabilities:
Property and equipment
5,972
6,295
Inventories
1,825
1,641
Other
1,618
1,827
Total deferred tax liabilities
9,415
9,763
Net deferred tax liabilities
$
2,966
$
3,313
The deferred taxes are classified as follows in the Company's Consolidated Balance Sheets:
January 31,
(Amounts in millions)
2015
2014
Balance Sheet classification:
Assets:
Prepaid expenses and other
$
728
$
822
Other assets and deferred charges
1,033
1,151
Asset subtotals
1,761
1,973
Liabilities:
Accrued liabilities
56
176
Deferred income taxes and other
4,671
5,110
Liability subtotals
4,727
5,286
Net deferred tax liabilities
$
2,966
$
3,313
As of January 31,
(Amounts in millions)
2015
2014
ASSETS
Current assets:
Cash and cash equivalents
$
9,135
$
7,281
Receivables, net
6,778
6,677
Inventories
45,141
44,858
Prepaid expenses and other
2,224
1,909
Current assets of discontinued operations
—
460
Total current assets
63,278
61,185
Property and equipment:
Property and equipment
177,395
173,089
Less accumulated depreciation
(63,115
)
(57,725
)
Property and equipment, net
114,280
115,364
Property under capital leases:
Property under capital leases
5,239
5,589
Less accumulated amortization
(2,864
)
(3,046
)
Property under capital leases, net
2,375
2,543
Goodwill
18,102
19,510
Other assets and deferred charges
5,671
6,149
Total assets
$
203,706
$
204,751
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND EQUITY
Current liabilities:
Short-term borrowings
$
1,592
$
7,670
Accounts payable
38,410
37,415
Accrued liabilities
19,152
18,793
Accrued income taxes
1,021
966
Long-term debt due within one year
4,810
4,103
Obligations under capital leases due within one year
287
309
Current liabilities of discontinued operations
—
89
Total current liabilities
65,272
69,345
Long-term debt
41,086
41,771
Long-term obligations under capital leases
2,606
2,788
Deferred income taxes and other
8,805
8,017
Redeemable noncontrolling interest
—
1,491
Commitments and contingencies
Equity:
Common stock
323
323
Capital in excess of par value
2,462
2,362
Retained earnings
85,777
76,566
Accumulated other comprehensive income (loss)
(7,168
)
(2,996
)
Total Walmart shareholders' equity
81,394
76,255
Nonredeemable noncontrolling interest
4,543
5,084
Total equity
85,937
81,339
Total liabilities, redeemable noncontrolling interest, and equity
$
203,706
$
204,751
Explanation / Answer
Problem 2: (10 points) Refer to the balance sheet, note 1 (Property and Equipmen
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