CASE: Comparing Financial Information Refer to the financial statements of The Home Depot in Appendix A and Lowe's Companies at the end of this book, or download the annual reports from the Cases section of the text's Web site.
Required: 1. What method of depreciation does the company use?
2. What is the amount of Accumulated Depreciation at February 1, 2008? What percentage is this of the total cost of property and equipment? Is this a larger (or smaller) percentage of the total cost of property and equipment than for The Home Depot (in CP10-1)? What does it suggest to you about the length of time the assets have been depreciated?
3. Lowe's estimated useful life of buildings differs from that estimated by The Home Depot. How will this affect the fixed asset turnover ratios of the two companies?
4. What amount of depreciation expense was reported on the income statement for the current year? What percentage of net sales is it? Compare this percentage to that of The Home Depot and describe what this implies about the two companies' operations.
5. What is the fixed asset turnover ratio for the current year? Compare this ratio to that of The Home Depot and describe what it implies about the operations of the two companies.