Reference no: EM13827603

Problem:

Following are selected footnote disclosures from Parson's (an outdoor adventure superstore) financial statements:

5. PROPERTY AND EQUIPMENT
	Depreciable Life
	in Years	2011	2010
Land and improvements	Up to 20	$169,839	$169,398
Buildings and improvements	7 to 40	549,793	500,193
Furniture, fixtures and equipment	3 to 15	516,323	444,948
Assets held under capital lease	Up to 30	14,363	14,363
Property and equipment		1,250,318	1,128,902
Less accumulated depreciation and amortization		(413,993)	(363,608)
		836,325	765,294
Construction in progress		30,574	52,653
		$866,899	$817,947

Required:

a. Compute the PPE turnover for 2011 (Total revenue in 2011 is $2,811,166 thousand). Does the level of its PPE turnover suggest that Parson's is capital intensive? (Hint: The median PPE turnover for all publicly traded companies is approximately 1.3.)

b. Do you believe that Parson's balance sheet reflects all of the company's operating assets?

c. Parson's reported depreciation expense of $71,343 thousand in 2011. How much of this related to Land and improvements? How much of this expense related to Construction in progress? Explain.

d. Assuming that Parson's uses straight-line depreciation, estimate the useful life of its depreciable PPE assets.

Summary of problem:

The question belongs to Finance as well as it deals with questions about a company whose PPE turnover needs to be computed. The operating assets being reflected in balance sheet and estimating the depreciation of the PPE assets.