Question

Contrans Group Inc. is a public company based in Woodstock, Ontario. The company provides freight transportation and waste collection services. The following information is an extract from Contrans’ Consolidated Financial Statements for its year ended December 31, 2013.
Contrans’ depreciation policies for its property and equipment state that:
The estimated useful lives and depreciation methods are as follows
Management reviews depreciation methods, residual values and the estimated useful lives of these assets annually and adjusts amortization accordingly on a prospective basis.
Required:
a. Determine the average age percentage of Contrans’ rolling stock (highway tractors, waste trucks, and trailers), both owned and leased. Compare the average age percentage of the rolling stock owned by the company with that of the leased rolling stock. Which group is closer to being fully depreciated?
b. Determine the average age (in years) of Contrans’ rolling stock (owned). Compare this with the ratio determined for the company’s rolling stock (leased) and identify which group of rolling stock is newer.
c. Determine the annual straight-line depreciation rate that Contrans is using for its waste bins.
d. Compare the depreciation methods Contrans uses for its rolling stock. Explain, in your own words, what the company’s management is saying about the pattern in which they expect the economic benefits of these assets will be consumed.
e. If Contrans’ net carrying amount for property and equipment was $215,369 thousand at December 31, 2013, and $184,160 thousand at December 31, 2012, and its sales revenue was $572,331 thousand for the 2013 fiscal year, determine the company’s fixed asset turnover ratio. Explain the result of this ratio.


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  • CreatedJune 11, 2015
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