Locate Nike\'s 2015 Form 10-K (Annual Report). [Nike has a fiscal year ending Ma

Question

Locate Nike's 2015 Form 10-K (Annual Report). [Nike has a fiscal year ending May 31, 2015.] To locate information on PP4E and Intangible Assets, see Nike's Balance Sheet and related Notes to the F/S (specifically, Notes 1, 3, and 4). Also scan the Cash Flow Statement. (Nike shows $ amounts in millions, and likewise your answers should be shown in millions.) What is Nike's total PP&E; at May 31, 2015? Fill in the summary table below, using Note 3. Of the 5 types of PP&E; shown in Note 3, which two types would not be depreciated? Which depreciation method does Nike use? (See Note 1, "PP&E; and Depreciation" section.) What is Nike's total depreciation expense for 2015, as shown on the Cash Flow Statement? Why was depreciation added back to net income to determine Cash provided by operations?

Explanation / Answer

1.a Nike's total PP&E as on May 31st 2015

1.b Out of the 5 items from Note 3 Land and Construction in Process will not be depreciated.

1.c Depreciation method used by Nike is Straight line method as per the below:

Property, plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for buildings and leasehold improvements over 2 to 40 years and for machinery and equipment over 2 to 15 years.

Depreciation and amortization of assets used in manufacturing, warehousing and product distribution are recorded in Cost of sales. Depreciation and amortization of other assets are recorded in Total selling and administrative expense.

2.a Total Depreciation for 2015 as per Cash Flow Statement is $606.

2.b Depreciation is added back to Net income to determine the Cash provided by operations because it not an OPERATING Expense..

PP&E Gross $6,352 Less: Accumulated Depreciation $3,341 PP&E Net $3,011

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