Chapter+9

E9–1 **
 * 


 * **Hasbro, Inc. ** ||
 * **Excerpts from Balance Sheet ** ||
 * **December 25, 2005 ** ||
 * **(in millions) ** ||
 * ASSETS ||||  ||   ||
 * Current Assets ||||  ||   ||
 * Cash and cash equivalents ||||  || $942  ||
 * Accounts receivable |||| $553 ||   ||
 * Less: Allowance for doubtful accounts |||| __ 30 __ || 523 ||
 * Inventories ||||  || 179  ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Prepaid expenses and other current assets ||||  || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> 185 __ ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Total current assets ||||  || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> 1,829 __ ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Property, Plant, and Equipment ||||  ||   ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Land and improvements ||||  || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">7  ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Buildings and improvements ||||  || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">174  ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Machinery and equipment ||||  || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> 332 __ ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Property, plant, and equipment (at cost) ||||  || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">513  ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Less: Accumulated depreciation ||||  || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> 227 __ ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Total property, plant, and equipment (net) ||||  || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> 286 __ ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Other Assets ||||  ||   ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> Goodwill ||||  || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">467  ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> Other intangibles, net of accumulated amortization ||  || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">613  ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> Other noncurrent assets ||||  || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> 226 __ ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Total other assets ||||  || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> 1,306 __ ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Total Assets ||||  || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">$3,421 __ ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Total other assets ||||  || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> 1,306 __ ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Total Assets ||||  || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">$3,421 __ ||


 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">E9–2 **

<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">Req.1 The renovation costs should be capitalized because they are necessary costs of preparing the building for use.

<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">Req. 2


 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">dr. Land (+A) .................................................... || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">127,400 <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman'; mso-bidi-font-size: 12.0pt;">1  ||   ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">dr. Buildings (+A) ............................................ || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">76,600 <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman'; mso-bidi-font-size: 12.0pt;">2  ||   ||
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';"> cr. Cash (-A) .............................................. ||   || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">204,000  ||

<span style="font-family: 'Helvetica','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: Helvetica; msobidifontsize: 12.0pt; msofareastfontfamily: Helvetica; msolist: Ignore;">1 <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">Land = $182,000 x 70% = $127,400 <span style="font-family: 'Helvetica','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: Helvetica; msobidifontsize: 12.0pt; msofareastfontfamily: Helvetica; msolist: Ignore;">2 <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">Building = ($182,000 x 30%) + $22,000 = $76,600

<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">Req. 3

<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-family: 'Times New Roman';">The depreciation expense on the building for the first year is $6,000 based on the following calculation:
 * <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Cost of building: ||  ||   || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Straight-line Depreciation: ||
 * |||| <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Initial Payment || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">$54,600 ||   || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">($76,600 cost - $4,600 residual value) x ||
 * |||| <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Renovation prior to use || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;"> 22,000 __ ||  || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">1/12 years = $6,000  ||
 * ||  || <span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">Acquisition cost: || __<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt; mso-fareast-language: EN-US;">$76,600 __ ||   ||   ||

<span style="font-family: 'Arial','sans-serif'; mso-bidi-font-size: 12.0pt;">Req. 4

Computation of the book value of the property at the end of year 2:
 * Building || $ 76,600 ||  ||
 * Less: Accumulated depreciation ($6,000 x 2 years) || __(12,000)__ || $ 64,600 ||
 * Land ||  || __127,400__ ||
 * Book Value: ||  || __$192,000__ ||