The 2007 annual report of Continental Airlines, Inc., included the following information (all dollar amounts are in
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2007
Net interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 356
Earnings from continuing operations (before taxes) . . . . . . . . . . 566
Net property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,558
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,105
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,555
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,550
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . 1,133
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . (760)
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . (368)
Interest capitalized during the year . . . . . . . . . . . . . . . . . . . . . . . 27
1. Recompute all the amounts given, assuming that all the capitalized interest for 2007 was expensed. Ignore income taxes and the possibility of same-year depreciation of interest capitalized in 2007.
2. Repeat (1) assuming that, of the $27 million of interest capitalized in 2007, Continental had depreciated $3 million in that same year.
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Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
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