Question

Assume that the use of an accelerated depreciation method would have resulted in 25% more accumulated depreciation than reported at July 30, 2017, and that Campbell’s consolidated balance sheets would have been affected by the entire difference. By what percentage would this have reduced the retained earnings amount reported at July 30, 2017? (Round your percentage answer to 1 decimal place. (eg 32.6))

CAMPBELL SOUP COMPANY Consolidated Statements of Cash Flows (millions) 2016 2015 887 $ 563 $ Cash flows from operating activities: Netan Adjustments to reconcile set eamings to operating cash flow Impriment charges.. . Restructuring charges Stock-based compensation Pension and postretirement benefit expense (income) Depreciation and amortization.... Deferred income taxes Other, bet Changes in working capital, net of acquisitions Accounts receivable Inventories Prepaid assets Accounts payable and accrued liabilities Pension find contributions ....... Net receipts from hedging activities ......... Other .. (53) 1.291 (58) .491 1 1.206 (338) (341) (380) 15 (232) (30) (18) (6) (603) (365) (354) 245 (762) 100 211 215 300 Net cash provided by operating activities.................................... Cash flows from investing activities: Purchases of plant assets.. Sales of plant assets Business acquired, net of cash acquired...... Other Net cash used in investing activities ........................................ Cash flows from financing activities: Net short-term borrowings (repayments)...... Long term borrowing Long-term repayments Repayments of notes payable.... Dividends paid.... . Treasury stock purchases..... Treasury stock issuances.... Contributions from no controlling interest Payments related to tax withholding for stock-based compensation Orber, bet Net cash used in mancing activities Effect of exchange rate changes on cash ............. Net change in cash and cash equivalents Cash and cash equivaleats-beginning of period Cash and cash equivalents -- end of period (90) (400) (309) (394) (246) (145) 911) (1.099) $ 319 2065353 See accompanying Notes to Consolidated Financial Statements

Answer 1

Ans. The use of an accelerated depreciation method would have resulted in 25% more accumulated depreciation than reported at July 30, 2017, and that Campbell’s consolidated balance sheets would have been affected by the entire difference.

Current Tax Rate = 406 / 1293 = 31.40%

Tax savings on Accelerated Depreciation = 25 x 31.40% = 7.85%

Therefore, this would have reduced the retained earnings amount reported at July 30, 2017 by 17.15% (25 - 7.85).