Access the 2011 financial statements for RONA Inc. by going to investor relations section of the company’s website. Answer the same questions as in Web Problem 7-1. For each question, indicate where in the financial statements you found the answer, and/or provide a brief explanation.
In Web Problem 7-1
(a) Are the expenses on the income statement presented by function or nature? Briefly explain.
(b) What is amortization on the other intangible assets during the year, and why does amortization expense not appear as a separate component on the income statement?
(c) Review the useful lives of the company's intangible and tangible assets. If you had to pick one instance where you felt that the useful life was either understated or overstated, which asset would it be, and why?
(d) What portion of the company's assets is property, plant, and equipment? Has the portion increased or decreased from last year?
(e) How does the company value its plant and equipment?
(f) Assume that one of the subsidiaries sold equipment to the parent two years ago and reported a substantial gain. The parent still owns and uses this equipment. Due to an oversight, the intercompany gain has never been eliminated when preparing the consolidated statements. What is the impact of this error on total asset turnover and return on assets for the current year?
(g) Now assume that the company changes its policy to report its plant and equipment at fair value. Also, assume that the fair value of plant and equipment is greater than its carrying amount. What impact would this change in policy have on return on equity for the year and the share price for the company?