The financial statements for Urban Outfitters is available online. It can be goo
ID: 2654388 • Letter: T
Question
The financial statements for Urban Outfitters is available online. It can be googled.
CP8-2 Finding Financial Information LO8-1, 8-2, 8-6 Refer to the financial statements of Urban Outfitters given in Appendix C at the end of this book. Required: 1. What method of depreciation does the company use? 2. What is the amount of accumulated depreciation and amortization at the end of the most recentreporting year? 3. For depreciation purposes, what is the estimated useful life of furniture and fixtures? 4. What was the original cost of leasehold improvements owned by the company at the end of the most
recent reporting year? 5. What amount of depreciation and amortization was reported as expense for the most recent
reporting year? 6. What is the company’s fixed asset turnover ratio for the most recent year? What does it suggest?
Explanation / Answer
Answer
As per your request in comment posted by you , all answers are given as per financial statements for fiscal year ending January 31, 2012 (SEC filling).
1. What method of depreciation does the company use?
Answer :
Depreciation is computed using the straight-line method over five years for furniture and fixtures, the lesser of the lease term or useful life for leasehold improvements, three to ten years for other operating equipment and 39 years for buildings. Major renovations or improvements that extend the service lives of our assets are capitalized over the extension period or life of the improvement, whichever is less. The Company reviews long-lived assets for possible impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. This determination includes evaluation of factors such as future asset utilization and future net undiscounted cash flows expected to result from the use of the assets. Management believes there has been no material impairment of the Company’s long-lived assets as of January 31, 2012.
2. What is the amount of accumulated depreciation and amortization at the end of the most recent reporting year?
Answer : Accumulated depreciation : $ 616,787,000 ( Year 2012)
3. For depreciation purposes, what is the estimated useful life of furniture and fixtures?
Answer :
Depreciation is typically computed using the straight-line method over five years for furniture and fixtures.
4. What was the original cost of leasehold improvements owned by the company at the end of the most recent reporting year?
Answer : Leasehold improvements (Original cost) : $ 676,644,000 ( Year 2012)
5. What amount of depreciation and amortization was reported as expense for the most recent reporting year?
Answer : Depreciation expense for property and equipment for fiscal year ended 2012 : $ 100,739,000
6. What is the company’s fixed asset turnover ratio for the most recent year? What does it suggest?
Answer : Fixed asset turnover ratio = ( Net sales / Net Property and equipment)
= (2,473,801,000)/(684,979,000) (Year 2012)
= 3.61 times
Fixed-asset turnover ratio suggests a company's ability to generate net sales from fixed-asset investments. A higher fixed-asset turnover ratio shows that the company is effective in using the investment in fixed assets to generate revenues.
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