Refer to the RadioShack Corporation Consolidated Financial Statements in Appendix B at the end of this book. This case leads you through an analysis of the activity in Radioshack’s long-term assets, as well as the calculation of its rate of return on total assets.
1. On the statement of cash flows, how much did RadioShack Corporation pay for capital expenditures during fiscal 2010? In what section of the cash flows statement do you find this amount?
2. Explain RadioShack Corporation’s policy for capitalization of fixed assets. You can find this in Note 2 of the Consolidated Financial Statements (Summary of Significant Accounting Policies).
3. Which depreciation method does RadioShack Corporation use? Over what useful life does RadioShack Corporation depreciate various types of fixed assets?
4. Were RadioShack Corporation’s plant assets proportionately newer or older at the end of fiscal 2010 (versus 2009)? Explain your answer. (Challenge)
5. Using DuPont Analysis, calculate RadioShack Corporation’s rate of return on total assets for 2010 and 2009. Total assets at December 31, 2008, were $2,254. Did the company perform better or worse in 2010 than in 2009?