Inferring Depreciation Amounts and Determining the Effects of a Depreciation Error on Key...

Inferring Depreciation Amounts and Determining the Effects of a Depreciation Error on Key Ratios (AP8-4)

Best Buy Co., Inc., headquartered in Richfield, Minnesota, is one of the leading consumer electronics retailers, operating more than 1,000 stores in the United States, Europe, Canada, China, and Mexico. The following was reported in a recent annual report:

Required:

1. Assuming that Best Buy did not sell any property, plant, and equipment in the current year, what was the amount of depreciation expense recorded during the current year?

2. Assume that Best Buy failed to record depreciation during the current year. Indicate the effect of the error (i.e., overstated or understated) on the following ratios:

 a. Earnings per share.

 b. Fixed asset turnover.

 c. Current ratio.

 d. Return on assets.