Answer the following four Questions:
Partial Balance Sheet and Cash Flow Statement
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February 28,
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Balance Sheet (dollars in millions)
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2012
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2011
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Assets
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Total current assets.
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$7,987
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$6,901
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Property, plant, and equipment
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4,831
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4,197
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Less: Accumulated depreciation
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2,124
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1,729
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Goodwill
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555
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512
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Year Ended
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February 28,
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Statement of Cash Flows (dollars in millions)
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2012
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2011
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Operating activities:
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Net income
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$1,148
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$986
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Noncash items affecting net income:
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Depreciation
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460
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458
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Investing activities:
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Additions to property, plant, and equipment
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(713)
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(619)
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1. How much was Avril's cost of plant assets at February 28, 2012? How much was the book value of plant assets? Show computations.
2. The financial statements give three evidences that Avril purchased plant assets and goodwill during fiscal year 2012. What are they?
3. Prepare T-accounts for Property, Plant, and Equipment; Accumulated Depreciation, and Goodwill. Then show all the activity in these accounts during 2012. Label each increase or decrease and give its dollar amount. During 2012, Avril sold plant assets that had cost the company $79 million (accumulated depreciation on these assets was $65 million.) Assume goodwill was not impaired during 2012.
4. (Independent of the information in Requirement 3) Avril reviews its assets for impairment annually. On February 28, 2012, the fair value of the goodwill is estimated at $450 million. Prepare the journal entry to record the impairment.